MEETING DATE:
NOVEMBER 26, 2024
SUBJECT:
Title
DEVELOPMENT-RELATED FEE UPDATES COMPRISING THE FOLLOWING:
ITEM A: ORDINANCE 2024-1552 - REPEALING ORDINANCE 2003-1203
ITEM B: RESOLUTION 2024-9384 - ADOPTING A DEVELOPMENT IMPACT FEE NEXUS STUDY AND MAKING FINDINGS AS REQUIRED BY THE MITIGATION FEE ACT
ITEM C: RESOLUTION 2024-9385 - ADOPTING THE 2025 DEVELOPMENT IMPACT FEE SCHEDULE BASED ON THE FINDINGS SET FORTH IN THE CITY OF SAN MARCOS DEVELOPMENT IMPACT FEE NEXUS STUDY UPDATE DATED OCTOBER 4, 2024
ITEM D: RESOLUTION 2024-9386 - ADOPTING POLICY FOR PAYMENT OF DEVELOPMENT IMPACT FEES (PUBLIC FACILITIES FEES)
ITEM E: RESOLUTION 2024-9387 - REPEALING RESOLUTION 2000-5417 AND ESTABLISHING THE AMOUNT OF FEES PAYABLE IN-LIEU OF PROVIDING AFFORDABLE HOUSING UNITS AS ALLOWED BY CHAPTER 20.310 OF THE SAN MARCOS MUNICIPAL CODE
ITEM F: RESOLUTION 2024-9388 - ADOPTING A POLICY ON THE IMPLEMENTATION OF UPDATED DEVELOPMENT IMPACT FEES (PUBLIC FACILITIES FEES) AND INCLUSIONARY HOUSING IN-LIEU FEE FOR ACTIVE PROJECTS
ITEM G: RESOLUTION 2024-9389 - REPEALING RESOLUTION 2001-5777 ACCEPTING THE RECOMMENDATIONS OF THE UPDATED CITYWIDE USER FEE STUDY, ESTABLISHING A NEW SCHEDULE OF USER FEES EFFECTIVE MARCH 3, 2025
ITEM H: ORDINANCE 2024-1553 - AMENDING CHAPTER 17.44 OF TITLE 17 OF THE SAN MARCOS MUNICIPAL CODE RELATIVE TO DEVELOPMENT SERVICES AND PUBLIC FACILITIES EXACTIONS, FEES, AND/OR COSTS
Body
Recommendation
Recommendation
1. CONDUCT and ADOPT the following in the order set forth:
2. For Item A:
a. OPEN, conduct, and close a public hearing to receive testimony regarding the proposed Repeal of Ordinance 2003-1203; and
b. ADOPT Ordinance 2024-1552 repealing Ordinance 2003-1203. (Attachment 1)
3. For Item B:
a. OPEN, conduct, and close a public hearing to receive testimony regarding the proposed Development Impact Fee Nexus Study; and
b. ADOPT Resolution 2024-9384 adopting the Development Impact Fee Nexus Study and Making Findings as Required by the Mitigation Fee Act (Attachment 2)
4. For Item C:
a. OPEN, conduct, and close a public hearing to receive testimony regarding the proposed Development Impact Fee Schedule; and
b. ADOPT Resolution 2024-9385 adopting the 2025 Development Impact Fee Schedule (Attachment 3)
5. For Item D - ADOPT Resolution 2024-9386 establishing a policy for payment of Development Impact Fees. (Attachment 4)
6. For Item E:
a. OPEN, conduct, and close a public hearing to receive testimony regarding the proposed Inclusionary Housing In-Lieu Fee; and
b. ADOPT Resolution 2024-9387 repealing Resolution 2000-5417 and establishing the Amount of Fees Payable In-Lieu of Providing Affordable Housing Units (Attachment 5).
7. For Item F - ADOPT Resolution 2024-9388 adopting a policy on the implementation of Updated Development Impact Fees and Inclusionary Housing In-Lieu Fee for Active Projects (Attachment 6).
8. For Item G:
a. OPEN, conduct, and close a public hearing to receive testimony regarding the proposed Citywide User Fees; and
b. ADOPT Resolution No. 2024-9389 repealing Resolution 2001-5777 Accepting the Recommendations of the Updated Citywide User Fee Study, Establishing a New Schedule of User Fees Effective March 3, 2025 (Attachment 7).
9. For Item H:
a. OPEN, conduct, and close a public hearing to receive testimony regarding the proposed Ordinance 2024-1553 Amending Chapter 17.44 of Title 17 of the San Marcos Municipal Code; and
b. ADOPT Ordinance 2024-1553 Amending Chapter Title 17.44 of Title 17 of the San Marcos Municipal Code Relative to Development Services and Public Facilities Exactions, Fees, and/or Costs. (Attachment 8).
Body
Board or Commission Action
On July 23, 2024, City Council adopted Ordinance 2024-1550, amending San Marcos Municipal Code Chapter 20.310 addressing requirements for Inclusionary Housing and Associated Density Bonus calculations for residential rental projects and Inclusionary Housing agreements.
On June 17, 2024, the Planning Commission voted 6-0-3 recommending approval of the proposed ordinance amendment to the City Council.
On April 25, 2000, City Council adopted Resolution No. 2000-5417, established the City of San Marcos Inclusionary Hosing In-Lieu Fee policy and practice.
In November 2001, City Council adopted Resolution 2001-5777 adopting the 2001 Fee Study and updating the fee schedule for Building, Engineering, Planning, Development Services, and Fire Prevention User Fees.
On October 28, 2003, the City adopted Ordinance 2003-1203 the Updated Public Facilities Financing Plan, to establish public facilities fees to mitigate the impact of development.
Relevant Council Strategic Theme
Good Governance.
Relevant Department Goal
Not applicable.
Executive Summary
Items A, B, C, and D: Development Impact Fees
City Development Impact Fees, known as Public Facilities Fees (PFF), fund the construction and expansion of public infrastructure. Public Facilities Fees were established through the adoption of Ordinance 2003-1203 and were last updated under Council Resolution 2008-7007. Under the Mitigation Fee Act, the City is allowed to impose a fee on development to mitigate impacts of that development to citywide infrastructure. These fees ensure that new development projects contribute their fair share toward the costs of necessary citywide public facilities, including streets, parks, and other infrastructure, offsetting indirect impacts of development. The City currently imposes impact fees on all new development or redevelopment, with certain development having statutory exemptions. The PFF were last updated in 2008, and the existing schedule of fees is out of alignment with current City infrastructure plans.
Item A: Repeal of Ordinance 2003-1203
The City adopted Ordinance 2003-1203 which established the Public Facilities Financing Plan to establish public facilities fees to mitigate the impact of development. Staff is requesting that Ordinance 2003-1203 be repealed and any pertinent provisions related to the City collection of the payment of PFF be incorporated into Resolution 2024-9386 for consideration of approval by Council (Item D).
Item B: Adoption of Development Impact Fee Nexus Study
The 2024 Development Impact Fee Nexus Study (Attachment 2) establishes new maximum fees based on current infrastructure plans. Resolution 2024-9384 would adopt the Development Impact Fee Nexus Study in compliance with the Mitigation Fee Act.
Item C: Adoption of Development Impact Fee Schedule
The proposed Development Impact Fees would provide funding for transportation, recreation, fire and EMS, advance planning, habitat conservation, and storm drainage facilities. Resolution 2024-9385 would adopt the adjusted Development Impact Fee Schedule (Attachment 3).
Item D: Policy for Payment of PFF
Ordinance 2003-1203 established the public facilities financing plan, established a PFF schedule, and established procedures for calculating and collecting PFF. Much of Ordinance 2003-1203 has been replaced by the procedures provided for in the Mitigation Fee Act and Ordinance 2003-1203 is no longer applicable. Remaining provisions in that ordinance provide a policy on when and how PFF are collected for various types of development. Resolution 2024-9386 incorporates those remaining provisions into a policy providing the procedures for the payment of PFF.
Item E: Inclusionary Housing In-Lieu Fees
The City’s Inclusionary Housing Ordinance requires development to reserve 15% of housing units within new residential developments for affordable housing. Alternatively, the development may pay a fee in-lieu of construction as per Resolution 2000-5417.
The Inclusionary Housing In-Lieu Fee Study (Attachment 5) establishes a new methodology for the establishment of the in-lieu fee amount that considers current market conditions, the economic impacts of on-site production, and the off-site affordability gap created by the need to produce affordable housing.
Item F: Implementation Policy
Projects currently in process would be subject to the proposed Development Impact Fee and Inclusionary Housing In-Lieu Fee increases unless a policy otherwise grants development the ability to pay the current fees. The proposed policy establishes timeframe for in-process projects to remain subject to current fees.
Item G: User Fees
The City charges a variety of User Fees to pay for voluntary programs which benefit a limited number of customers and do not have a greater community benefit. Examples of User Fees include permits, inspection, entitlement processing, and other building or development-related fees. The City is allowed by law to recover costs associated with providing these services.
The User Fee Study (Attachment 7) evaluates the current cost to provide services and proposes potential fee charges to achieve varying levels of cost recovery for each type of service. The proposed fees to be adopted are provided in Attachment 7.
Item H: Amendments to Title 17.44 of the San Marcos Municipal Code
Title 17.44 of the San Marcos Municipal Code addresses Development Services and Public Facilities Exactions, Fees, and/or Costs. As a result of the repeal of Ordinance 2003-1203 and updates to state law, Title 17.44 needs to be amended to be consistent with these changes.
Discussion
Many of the City’s development fees have not been updated for more than 15 years. Regular review and analysis of these fees ensures that the City can appropriately support services while also keeping pace with changing city growth and dynamics. A comprehensive update to development fees is proposed, including the Engineering News-Record Construction Cost Indicator (CCI), or other well-established annual escalation factor, applicable to all three categories of fees.
Outreach and communication have been paramount to the process of developing the proposed updates to development fees. The City engaged with key stakeholders throughout, provided information to the public at the October 13, 2024 street fair, and hosted a virtual public workshop on October 23, 2024. Stakeholder comments informed the final recommended fee amounts.
All of the proposed development fees, including Development Impact Fees, Inclusionary Housing In-Lieu Fees, and User Fees, will take effect on Monday, March 3, 2025. This will provide adequate time for staff to communicate with residents and developers regarding individual project grace periods for Impact Fees and Inclusionary Housing In-Lieu Fees, as well as ensure sufficient time to update City systems and documentation with the new fees.
Item A: Repeal of Ordinance 2003-1203
The City adopted Ordinance 2003-1203 which established the Public Facilities Financing Plan to establish public facilities fees to mitigate the impact of development. The Mitigation Fee Act now governs the procedures to establish PFF and many of the provisions of Ordinance 2003-1203 are no longer applicable. Staff is requesting that Ordinance 2003-1203 be repealed and any pertinent provisions related to the City collection of the payment of PFF be incorporated into a Resolution for consideration of approval by Council (Item D).
Item B: Adoption of Development Impact Fee Nexus Study
In 2021, Assembly Bill 602 (“AB 602”) amended the Mitigation Fee Act of the California Government Code, which governs Development Impact Fees. AB 602 emphasized the need to adopt a Development Impact Fee Nexus Study at a public hearing prior to the adoption of any new or increased Development Impact Fees. The City retained the professional services of Willdan Financial Services to prepare the City of San Marcos Development Impact Fee Nexus Study Update. The 2024 Development Impact Fee Nexus Study (Attachment 2) determines the reasonable relationship, or nexus, between the fee and the purpose of the fee and how it addresses the impact. The Development Impact Fee Nexus Study also establishes new maximum fees based on current infrastructure plans. Resolution 2024-9384 would adopt the Development Impact Fee Nexus Study in compliance with the Mitigation Fee Act.
Item C: Development Impact Fees
The City has had an Impact Fee program since 1988 known as Public Facilities Fees (PFF) and has periodically updated the program based on new infrastructure planning or changing development plans. The current PFF, last updated under Council Resolution 2008-7007 (2008 PFF), has remained unchanged for over 15 years, and no longer reflects the true cost of infrastructure development, nor the changing priorities of infrastructure demand of the City.
As explained above, the City conducted a Development Impact Fee Nexus Study to determine the reasonable relationship, or nexus, between the fee and the purpose of the fee and how it addresses the impact. The Development Impact Fee Nexus Study Update (Attachment 2) outlines fee updates to support future development in San Marcos through 2040. The study covers several categories, including:
• Transportation Facilities
• Parks, Recreation, and Trails
• Fire and EMS Facilities
• Advanced Planning
• Habitat Conservation
• Storm Drainage Facilities
The infrastructure and amenity categories above diverge from the facilities identified within the 2008 PFF. Key changes to the categories of proposed fees include removal of the SR-78 and Information Technology fees, inclusion of a new Fire and EMS category, and inclusion of a new Advance Planning category. Fire and EMS facilities include funding for new fire stations under the updated standards of coverage analysis. The new Advance Planning category funds ongoing advance planning such as drainage analysis and general plans needed to fully understand future infrastructure demand and to help to inform future updates to the PFF.
The fees are calculated based on the projected costs of new public facilities needed to support growth. The recommended fee amounts are less than the maximum identified by the Study. The Study proposes per-square-foot maximum justified fees as follows:
Table 1: Maximum Justified PFF (Per Square Foot)
|
|
Single-Family |
Multi-Family |
Commercial |
Office |
Industrial |
|
Transportation |
$4.48 |
$4.17 |
$18.50 |
$16.41 |
$11.23 |
|
Parks |
$7.02 |
$8.76 |
$- |
$- |
$- |
|
Fire Protection |
$0.52 |
$0.65 |
$1.17 |
$1.70 |
$0.64 |
|
Advance Planning |
$0.07 |
$0.09 |
$0.04 |
$0.06 |
$0.02 |
|
Habitat Conservation |
$0.17 |
$0.22 |
$0.10 |
$0.15 |
$0.05 |
|
Storm Drain |
$0.19 |
$0.21 |
$0.37 |
$0.40 |
$0.40 |
|
Total (Per SF) |
$12.45 |
$14.10 |
$20.18 |
$18.72 |
$12.34 |
To establish the above maximum fees, the Study evaluated the overall cost of new infrastructure and allocated a proportional share of those costs to new development. Staff analyzed the regional costs imposed on development, the ability of the market to absorb City impact fees while retaining a competitive environment with surrounding jurisdictions, and the funding necessary for current City infrastructure plans. Additionally, staff considered the proposed fees in conjunction with the proposed Inclusionary Housing In-Lieu Fee, discussed as Item E of this report.
The City may not wish to adopt fees at the above maximum justified levels because doing so could discourage new investment, slowing development and housing production. Benchmarking of impact fees across neighboring jurisdictions indicates that adopting the maximum would put the City out of alignment with its neighbors. Resulting recommended Impact Fee levels are shown below which would preserve the City’s alignment with the region.
Table 2: Recommended PFF (Per Square Foot)
|
|
Single-Family |
Multi-Family |
Commercial |
Office |
Industrial |
|
Transportation |
$2.24 |
$2.09 |
$9.25 |
$8.21 |
$5.62 |
|
Parks |
$3.51 |
$4.38 |
$- |
$- |
$- |
|
Fire Protection |
$0.52 |
$0.65 |
$1.17 |
$1.70 |
$0.64 |
|
Advance Planning |
$0.07 |
$0.09 |
$0.04 |
$0.06 |
$0.02 |
|
Habitat Conservation |
$0.17 |
$0.22 |
$0.10 |
$0.15 |
$0.05 |
|
Storm Drain |
$0.19 |
$0.21 |
$0.37 |
$0.40 |
$0.40 |
|
Total (Per SF) |
$6.70 |
$7.64 |
$10.93 |
$10.52 |
$6.73 |
Adoption of the recommended fees would largely retain the existing financial impact of PFF on development. Overall City impact fees would increase predominantly as a result of an increased housing fees. Adoption of the recommended fees would be accounted for separately and are prohibited from funding operations and maintenance and cannot be collected or used to cover existing capital or infrastructure deficiencies.
Item D: Policy for Payment of PFF
Ordinance 2003-1203 established the public facilities financing plan, established a PFF schedule, and established procedures for calculating and collecting PFF. Much of Ordinance 2003-1203 has been replaced by the procedures provided for in the Mitigation Fee Act and Ordinance 2003-1203 is no longer applicable. With its repeal along with the other actions taken on the PFF, retaining provisions in that ordinance pertaining to when and how PFF are collected for various types of development will be retained in a new policy. Specifically, the Policy would detail when PFF would be collected for residential, non-residential, and projects not requiring building permits. The policy also provides for procedures for waiver or reduction of PFF. Approval of Resolution 2024-9386 ensures those remaining provisions are implemented along with the PFF program.
Item E: Inclusionary Housing In-Lieu Fee
In 2000, City Council adopted Resolution 2000-5417 establishing an Inclusionary Housing In-Lieu Fee to support the City in meeting its Regional Housing Needs Allocation and affordable housing goals in its Housing Element. The In-Lieu fee is required to be paid to the City for the purpose of providing housing opportunities for lower and moderate-income households as specified in the Inclusionary Housing Ordinance.
In July 2024, City Council adopted Ordinance 2024-1550 amending the San Marcos Municipal Code Chapter 20 Section 310 Inclusionary Housing. Amendments included removing an exemption for new residential rental projects, allowing inclusionary housing units to be counted towards density bonus entitlements to ensure compliance with current state density bonus requirements, and improving Inclusionary Housing Affordable Agreements. Details on the amendments are included in the staff report, see Attachment 9.
The City’s Inclusionary Housing Ordinance establishes requirements for the inclusion of 15 percent of units for target households which shall be determined by supporting the deficit identified in the City’s most recent Annual Housing Element Report to assist, to the greatest extent possible, in meeting its self-certification goals and regional share needs as set forth in the Housing Element of the General Plan. For residential and for sale projects, developers may pay a fee in-lieu of reserving units for target households where the City Council has approved the payment of an in-lieu fee. Additionally, incentives are outlined as an alternative to support the City in providing more desirable housing types, such as affordable for sale options.
Prior to the recent municipal code updates in July, the Municipal Code allowed an exemption for certain residential development projects, which prompted the City to amend the Inclusionary Housing Ordinance and conduct a fee study. The City engaged Keyser Marston Associates, Inc. (KMA) to prepare an Inclusionary Housing In-Lieu Fee Study (Study) (Attachment 5) to evaluate the potential of updating the inclusionary housing In-Lieu fee for the City. As part of this effort, KMA reviewed the current affordable housing impact fee levels charged in local jurisdictions and evaluated a range of approaches to determine appropriate housing in-lieu fee levels for the City.
The proposed Inclusionary Housing In-Lieu Fee Study develops a fee range recommendation by evaluating the costs of affordable housing production using the funding gaps created by developing affordable units onsite and offsite, respectively. The Study used a variety of different housing product types to identify the funding gaps. For onsite production, the gap is determined by calculating the residual land value of a 100% market rate project and deducting the residual land value of a project with 15% affordable units (5% low and 10% moderate). The Study establishes the funding gaps for onsite and offsite affordable housing units averaged at $20,000 and $30,000 per unit, respectively or $20.00 - $30.00 per square foot. The fee range identified in the Study is presented in the table below for review and discussion but does not consider a broader scope of the fee reviewed by staff to determine a recommended fee.
Staff considered the above In Lieu fee ranges in conjunction with the proposed development impact fees discussed in Item C, as well as the applicability of the fee and impact on future development.
The current In-Lieu fee paid by developers is $9,300 per unit. The fee calculation has not been updated since 2000; and does not account for current market conditions or how the fee could be applied to future developments. The In-Lieu Fees are collected as new residential developments are issued their building permits and are held in Fund 203. The current balance of Fund 203 is $13.4 million. Over the last 20 years the In-Lieu Fee has supported the development of more than 3,308 units of affordable housing throughout the City. The Housing Element identified an average of 241 eligible new units its being completed annually over the last three years, applying the average on future development would provide an estimated 241 units to apply the updated fee towards, resulting in an estimate of $2.2 million annually if housing production remains on track with the prior three years.
As staff evaluated the fee study, consideration of fees of surrounding jurisdictions were also reviewed. The City analyzed the proposed fee range in conjunction with the benchmarking of all development impact fees to ensure alignment with the region, as discussed in Item C of this report.
While the study provides a thorough analysis of the mechanism to calculate the financing gap to develop affordable housing, it does not provide incentives to create on-site affordable housing. Housing security is most successfully achieved through home ownership, which is not incentivized with a flat fee used citywide. In reviewing other local jurisdictions, staff identified that other local agencies do incentivize the development of affordable home ownership by reducing the percentage of inclusionary units.
Considering all elements of the Study, staff recommends adoption of an In-Lieu fee of $15.00 per square foot of single-family and/or multi-family construction for both for-sale and rental residential development.
The proposed recommendations balance the needs of funding future affordable housing without becoming regressive to market rate development. The proposed Inclusionary In-Lieu Fee would result in a typical fee of approximately $31,000 for single-family homes and $16,000 for multi-family townhomes, based on average product sizes. Exact fees will be based on each unit’s actual square footage.
Item F: Implementation Policy
Generally, Impact Fees and Inclusionary In-Lieu Fees are large dollar amounts exacted at the time of building permit issuance. Because achieving building permit issuance can be a lengthy process that may take months to years depending on the scale and complexity of the project, projects typically budget for these fee amounts before even submitting the entitlement application. As a result, changes to fees midstream may fundamentally alter the financial considerations of the project, potentially rendering it infeasible or delaying it. Delayed or shelved projects have impacts to the city, including reducing job growth and economic vitality, or delaying the production of much needed housing. Typically, any new fee adopted would be applicable to projects already in process, unless mechanisms otherwise grant development the ability to pay based on existing fees.
The proposed policy would establish that projects already in the process may remain under the current Impact Fee and Inclusionary Housing In-Lieu Fee structure prior to any updates so long as project building permits are issued within two years. Additional consideration may be given to projects encountering delays outside of their control through up to two six-month administrative extensions, subject to certain criteria, allowing for up to a three-year grace period. The proposed policy would only apply to projects which are applied for and considered active prior to the effective date of new fees. This policy does not apply to User Fees.
The fee deferral program, which gives developers the option to defer the timing of payment of Public Facilities Fees, will still be offered. It provides the option to defer payment of PFF until the development is ready for its utility release.
Item G: User Fee Study:
California cities charge certain fees to recover costs of delivering exclusive-use services such as building, development, engineering, planning, and fire prevention services and associated reviews. The City assesses these User Fees for services predominantly benefiting a limited number of customers that do not have a direct benefit to the public. In accordance with state law, User Fees may be assessed when they reasonably relate to voluntary services so long as the fees do not exceed the full cost of providing the service. In November 2001, City Council adopted Resolution 2001-5777 adopting the 2001 Fee Study and updating the fee schedule for Building, Engineering, Planning, Development Services, and Fire Prevention User Fees meeting these requirements. The City has not performed a comprehensive analysis of its User Fees since 2001.
The 2023-24 proposed User Fee Study and recommended fee update (Attachment 7) calculates the total cost of providing a User Fee service by analyzing the fully-burdened hourly rates of the staff members involved, including direct salary, direct departmental overhead, and Citywide indirect overhead costs. The proposed fees to be adopted are provided in Attachment 7.
After determining the actual cost of providing a User Fee service, the Study identifies the recommended recovery rates for each type of fee. The recommended rates of cost recovery consider factors such as reducing the barrier to entry for residents and small businesses, and incentivizing applicants to apply for safety-related permits by offering lower fee amounts. In contrast, User Fees pertaining to large-scale developments are proposed for a higher rate of recovery. This strategy achieves balance across the fee schedule, because excessively high subsidization of private-benefit services that do not provide a general public benefit puts a significant strain on financial resources for public benefit programs such as fire prevention, law enforcement, recreation, and other city services. Therefore, increasing the rate of recovery on these limited benefit services ensures that resources for public benefit remain as robust as possible.
The User Fee Study data was compared against similar and common fees in the surrounding community, as well as an examination of proposed fee costs for residential and commercial prototypical projects. The analysis determined that the City of San Marcos falls significantly below cost recovery rates observed in surrounding communities. The recommended fee updates will better align with the region.
The Study also provides a new cost basis for some fees and adds other new fees. For example, a valuation basis is proposed for many Building Division fees, which aligns with practices in the San Diego market. New fees are added, such as Engineering fees for technical study reviews proposed to be charged separately in order to assess lower rates for less complicated permit reviews that do not involve such technical studies. Other fees added were the addition of consultant plan review fees to allow costs to remain accurate regardless of whether internal staff or third-party consultant services are used to provide the service, which will allow the City increased flexibility in providing services to the public to maintain high quality of service and reduced review times. A new category of fees for Business License processing is recommended in the Study to begin to capture the cost for this service.
Overall, the estimated impact for realigning cost recovery rates closer to rates observed in the surrounding market would be an increase in general fund revenue of about $300,000-$400,000 depending on development activity and permit volume. This increase in revenue still does not exceed the current cost of providing associated services, which is in compliance with California Law for user fee requirements.
Staff propose to increase fees at regular intervals, no more frequently than annually, based on CCI, CPI, market rate, or other factors determined by City Staff, provided that fees shall not exceed the cost of providing the services. This would ensure that the user fees maintain a reasonable relationship between the costs of services and unintended excessive subsidization for limited-benefit services does not occur in the future. City staff also recommends a comprehensive fee study to be done every 5-7 years to ensure current fees remain in line with rates observed in surrounding Cities.
Item H: Amendments to Title 17.44 of the San Marcos Municipal Code
Title 17.44 of the San Marcos Municipal Code addresses Development Services and Public Facilities Exactions, Fees, and/or Costs. As a result of the repeal of Ordinance 2003-1203, the adoption of the Policy on Payments of PFFs, and updates to state law, Title 17.44 needs to be amended to be consistent with these changes. The changes would correct references to various ordinances and resolutions, correct terminology, remove language inconsistent with other provisions of the San Marcos Municipal Code and clarify the distinction between User Fees and Public Facilities Fees.
Fiscal Impact
Impact Fees and Inclusionary Housing In-Lieu fees are not likely to increase substantially in the next few fiscal years as a result of grace periods for the new fees that may be granted to existing development applications. Revenue for Development Impact Fees (fund 402) is expected to largely stay the same but will increase slowly as the fee is increased by annual inflationary factors. The Inclusionary Housing In-Lieu Fee will see an increase in revenue for the City’s Affordable housing fund (Fund 203) as the fee now applies to new rental developments. The estimated annual revenue from In Lieu fees is $2.2 million annually but will vary based on the actual projects approved for construction. The City estimates an approximate increase of 30% to its Development Impact Fees and Inclusionary Housing In-Lieu Fees from current rates, primarily attributed to proposed increases in housing fees. Approval of the proposed User Fee schedules is anticipated to increase revenue for Building, Planning, and Engineering by $300,000-$400,000 annually in the General Fund (fund 100). Estimates will vary depending on development and permit volume for services covered under the User Fee.
Attachments
A. Ordinance 2024-1552 to repeal Ordinance 2003-1203
B. Resolution 2024-9384 to adopt a new Development Impact Fee Nexus Study and Making Findings As Required by the Mitigation Fee Act
C. Resolution 2024- 9385 adopting the 2025 Development Impact Fee Schedule Based on Findings Set Forth in the City of San Marcos Development Impact Fee Nexus Study Update Dated October 4, 2024
D. Resolution 2024-9386 to adopt a policy for payment of Public Facilities Fees (Development Impact Fees)
E. Resolution 2024- 9387 to repealing resolution 2000-5417 and Establishing the Amount of Fees Payable In-Lieu of providing Affordable Housing Units as Allowed by Chapter 20.310 of the San Marcos Municipal Code
F. Resolution 2024-9388 adopting a Policy on the Implementation of Updated Development Impact Fees (Public Facilities Fees) and Inclusionary Housing In-Lieu Fee for Active Projects
G. Resolution 2024- 9389, to repealing Resolution 2001-5777 Accepting the Recommendations of the Updated Citywide User Fee Study, Establishing a New Schedule of User Fees Effective March 3, 2025
H. Ordinance 2024-1553, amending Chapter 17.44 of Title 17 of the San Marcos Municipal Code Relative to Development Services and Public Facilities Exactions, Fees, and/or Costs.
I. Inclusionary Housing Ordinance Update Staff Report
Prepared by: Stephanie Kellar, Principal Civil Engineer
Submitted by: Isaac Etchamendy, Development Services Director
Reviewed by: Donna Apar, Finance Director
Approved by: Michelle Bender, City Manager