REPORT TO COUNCIL
SUBJECT
Title
Receive and File the FY 2023/24 Annual Status Report on Receipt and Use of Development Impact Fees and Adopt a Resolution Approving Findings Regarding Unspent Impact Fees and Find that the Action is Exempt from the California Environmental Quality Act (CEQA) Pursuant to Section 15378(b)(4) of the CEQA Guidelines
Report
BACKGROUND
To ensure that mitigation fees are spent in a timely manner and on projects for which they were collected, the State Legislature passed the Mitigation Fee Act (AB 1600). This Act applies to developer fees imposed or increased on or after January 1, 1989.
The Mitigation Fee Act (California Government Code Section 66000 et seq., “Act”) requires local agencies to present an annual, consolidated report showing the receipt and use of all development impact fees collected by the agency that are subject to the Act. The Annual Status Report must be reviewed by Council within 180 days after the close of the fiscal year. The Mitigation Fee Act also requires that the local agency make certain findings every five years regarding any unspent impact fees. The City has opted to make the required five-year findings for all impact fees every year when the annual report is presented. This increases efficiency and public transparency.
The City currently assesses four development impact fees: the Housing Mitigation/Impact Fee; the Sense of Place Fee; the Transportation Impact Fee; and the Park Dedication In-lieu Fee (referred to as Park Dedication Fee in this report). The first three are subject to the Mitigation Fee Act. The City’s Park Dedication Fee is subject to the Mitigation Fee Act if assessed pursuant to Sunnyvale Municipal Code Chapter 19.74 (Zoning - Park Dedication Fees for Rental Housing Projects). However, Park Dedication Fees assessed pursuant to the Quimby Act (California Government Code Section 66477) and codified by the City in the Sunnyvale Municipal Code Chapter 18.10 (Subdivisions - Parks and Open Space Dedication) are exempt. Therefore, only the details of the non-exempt Park Dedication Fees are included in the report; $70,567 was collected in the non-exempt fund for FY 2023/24 and interest earnings totaled $1,425,524 for the year. Expenditures in the exempt fund totaled $0. Total Park Dedication Fees collected for the year are presented in the City’s Annual Comprehensive Financial Report as well as the Recommended Budget for the coming year.
In FY 2015/16, the City established a Housing Impact Fee (RTC No. 15-0207). The Housing Impact Fee expanded the existing Housing Mitigation Fee to most nonresidential developments (all net new commercial, industrial, research and development, retail, and lodging projects in any zoning district, unless otherwise exempted) and included an impact fee for rental housing projects.
Regulations on rental housing changed in 2019 to reinstate a requirement for Below Market Rate housing and fees for small developments and partial units. Housing development may pay an in-lieu fee if approved by the City Council and may pay a fee for partial units. The monies associated with each are held in the same Housing Mitigation Sub-fund.
In addition to these four active fees, the City maintained a fund balance in FY 2023/24 resulting from Traffic Mitigation Fees. The Traffic Mitigation Fee was created in 2000 as a key component of the Transportation Strategic Program. It provides an interim revenue mechanism to fund needed upgrades to the transportation system resulting from new development. In 2004, the City stopped assessing Traffic Mitigation Fees and began assessing Transportation Impact Fees. Both the Traffic Mitigation Fees and the Transportation Impact Fees are subject to the Mitigation Fee Act and are included in the report. Traffic Mitigation Fees were completely exhausted as of the end of FY 2023/24 and will not be reported in future years.
EXISTING POLICY
Sunnyvale Municipal Code Chapters 3.50, 18.10, 19.74 and 19.75.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a "project" with the meaning of the California Environmental Quality Act ("CEQA") pursuant to CEQA Guidelines section 15378 (b)(4) in that is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
DISCUSSION
As prescribed by the Mitigation Fee Act, the Annual Status Report must include the following information for each development impact fee:
• A brief description of the fee and the fund into which the fee was deposited;
• The amount of the fee;
• The associated fund’s beginning and ending balances for the fiscal year;
• The total amount of fees collected and interest earned;
• Identification of each public improvement on which impact fees were expended and amount of expenditure on each improvement, including the total percentage of the cost of the public improvement that was funded with impact fees;
• Identification of approximate date by which construction of a public improvement will begin;
• Determination that sufficient funds have been collected to complete financing on an incomplete public improvement;
• Description of each inter-fund transfer or loan made from the account or fund, including the public improvement on which the loaned funds will be expended, and in the case of an inter-fund loan, the date on which the loan will be repaid and the rate of interest that the account or fund will receive on the loan; and
• Amount of any refunds made due to inability to expend impact fees once a determination is made that sufficient impact fees have been collected to finance a public improvement, and the improvement remains incomplete, and the City has not determined an approximate date by which construction will begin.
In 2023, Section 66006 of the Government Code was amended requiring the approximate construction commencement date, and in the following year, whether it began as noted previously. If the project was delayed, the reason for the delay and a revised approximate date the construction will commence is also required. These updates are included in the project descriptions.
This information is presented in the attached FY 2023/24 Annual Status Report on Receipt and Use of Development Impact Fees (Attachment 1). As of June 30, 2024, the ending balance for the mitigation fees are as follows:
|
Fee |
Ending Balance |
|
Housing Mitigation/Housing Impact |
$48,796,730 |
|
Park Dedication Fee |
$44,510,481 |
|
Sense of Place Fee |
$11,528,054 |
|
Traffic Mitigation Fee |
$0 |
|
Transportation Impact Fee |
$46,095,911 |
The Traffic Mitigation Fee is no longer collected by the City. Since the revenues were exhausted in FY 2023/24, this fee will no longer be included in future reporting.
The City’s 20-Year Resource Allocation Plans for the Housing Mitigation Fund (Fund 2021), Park Dedication Fund (2100), Capital Projects - Sense of Place Sub-fund (Fund 3113) and Capital Projects - Transportation Impact Fees Sub-fund (Fund 3111) fully commit collected impact fee revenue for existing or future projects. These plans can be found as part of the FY 2024/25 Adopted Budget document.
Of note, on August 13, 2024 the City Council awarded conditional funding commitments for $29.5M for the acquisition, pre-development, and/or development of three affordable housing developments, of which $22.6M consisted of Housing Mitigation Fee revenues. The purpose of Housing Mitigation Funds is to support the development of affordable housing projects, and the action was consistent with its purpose and various affordable housing policies and programs of the City’s Housing Element.
FISCAL IMPACT
There is no fiscal impact associated with receiving and filing the FY 2023/24 Annual Status Report on Receipt and Use of Development Impact Fees or adopting a resolution approving findings regarding unspent impact fees. In FY 2023/24, the City received $849,016 in newly collected development impact fees covered by the Mitigation Fee Act (AB 1600). The fee revenue will be used to fund public improvements necessary to meet the demand for services resulting from commercial and residential development in the City. The specifics of how these monies are programmed for expenditure are included in the status report as well as in the FY 2024/25 Adopted Budget.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the NOVA Workforce Services reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
The Mitigation Fee Act stipulates a 15-day public review period for the Annual Status Report. The Annual Status Report was available for public inspection on November 25.
RECOMMENDATION
Recommendation
Receive and file FY 2023/24 Annual Status Report on receipt and use of development impact fees and adopt a Resolution making findings regarding unspent impact fees as required by the Mitigation Fee Act (California Government Code Section 66000 et seq.) and find that the action is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15378(b)(4) of the CEQA Guidelines.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $250 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
___ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract*
___ Labor or personal employment contract
_X_ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: Nancy Grove, Finance Manager
Reviewed by: Dennis Jaw, Acting Director of Finance
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. FY 2023/24 Annual Status Report on Receipt and Use of Development Impact Fees
2. Resolution of the City Council of the City of Sunnyvale Approving the Development Impact Fee Annual Report for Fiscal Year 2023/24 and Making Findings Required by the Mitigation Fee Act