City Council
MEETING DATE: 9/26/2018
TITLE:
Title
Transportation Uniform Mitigation Fee (TUMF) Amendment 2018
End
FROM:
Pat Milos, Community Development Director
RECOMMENDATION:
Recommendation
Staff recommends the City Council hold a public hearing regarding TUMF fees; and introduce and provide first reading, by title only, to an ordinance amending Chapter 3.40 of the Municipal Code.
Body
BACKGROUND:
On June 25th, 2018 the Coachella Valley Association of Governments (CVAG) Executive Committee approved the 2018 Transportation Mitigation Fee Model Ordinance amending the model ordinance to reflect the changes to the TUMF program identified in the TUMF Nexus Study and effectively increasing the overall related trip rate from $192/trip to $245/trip. The Executive Committee also approved the associated 2018 TUMF Handbook.
Individual Jurisdictions have been asked to prepare Ordinances to adopt the model TUMF Ordinance approved in June 2018, at the local level. It is anticipated that the individual jurisdictions will be able to adopt a resolution implementing the Ordinance by the end of October 2018. CVAG anticipates that the Ordinance will go into effect starting November 1, 2018.
As of September 18, 2018, the Cities of Desert Hot Springs, Palm Springs, and La Quinta have adopted the first reading of the Ordinance. The Cities of Indio and Rancho Mirage will consider the first readings on September 19 with the Cities of Coachella, Indian Wells and Palm Desert considering their first readings the week of September 24, 2018.
Transportation Uniform Mitigation Fee (TUMF) Origins:
In 1987, the California Legislature passed a bill titled Assembly Bill 1600, also known as the “Mitigation Fee Act.” The bill outlined the legal requirements in which a development impact fee is charged by local governmental agency to an applicant related to the approval of a development project. The fee was intended to pay for all or a portion of the costs of public facilities associated with that project.
Two years later, in 1989, the Board of Supervisors of the County of Riverside drafted and adopted Ordinance No. 673, which outlines the establishment of a Transportation Uniform Mitigation Fee (TUMF) Program for the Coachella Valley. The fee is imposed on future residential, commercial and industrial development within the jurisdiction.
The TUMF program compliments the 20-year Measure A sales tax measure approved by the voters of Riverside County in November of 1988. Measure A was due to expire in 2009, but the Riverside County Transportation Commission adopted Ordinance 02-001 following a 30-year extension by the voters in 2002. Measure A is currently slated to expire in 2039.
At the time of its adoption, the intention was for the TUMF to generate at least the equivalent of Measure A funding toward the Regional Arterial System. Today, TUMF revenue provides only a small fraction of match toward Measure A funding. The TUMF is required to be updated periodically. To accomplish this, a Nexus Study is conducted to lawfully link projected growth in the Coachella Valley to the current Transportation Project Prioritization Study (TPPS) Area. CVAG has utilized a five-year period for its updates, seeking to maintain the fee level at a fair and equitable level as conditions change.
In 2006, CVAG conducted a TUMF Nexus Study to update the fee, with relatively small changes made. However, the fee was not fully implemented.
In 2010, CVAG considered another update but elected not to, given the economic downturn at that time. The current Nexus Study was initiated in 2015 and adopted in 2018. As part of the update, a TUMF/Nexus Advisory Sub-Committee was created, and it is representative of both CVAG’s membership and community stakeholders. CVAG staff had sought volunteers and appointments through the standing CVAG committee structure.
DISCUSSION:
Transportation Project Prioritization Study:
It is CVAG’s responsibility to prepare and adopt a Regional Transportation Plan (RTP) for the Coachella Valley. This is accomplished through the creation of the Transportation Project Prioritization Study (TPPS), which identifies and prioritizes the needs of transportation projects in the region.
The CVAG Executive Committee approved the most recent Transportation Project Prioritization Study (TPPS) in June of 2016. The TPPS incorporated regional Active Transportation Projects such as CV Link, consistent with the California Complete Streets Act (2008) and incorporated the Regional Arterial Cost Estimate which established the cost of our Regional Transportation System. Collectively, the TPPS, ATP and RACE create the summary of needs and priorities for the ultimate regional transportation system used for the Transportation Uniform Mitigation Fee (TUMF) Nexus Study.
Transportation in California is shifting its focus. While Measure A has benefited the Coachella Valley by bringing in a significant amount of funding to implement regional transportation projects, transportation needs and the TPPS will continue to change over time. A significant change to the last TPPS update was the inclusion of “Complete Streets.” Complete Streets is a transportation policy and design approach that requires streets to be “planned, designed, operated, and maintained to enable safe, convenient and comfortable travel and access for users of all ages and abilities regardless of their mode of transportation (walking, cycling, automobiles, public transportation).” The State Legislature has mandated that ATP projects be integrated into their RTPs.
In 2014 CVAG’s Executive Committee confirmed an approach that involved integrating ATP projects, such as CV Link, into the overall update of the TPPS. Historically, Measure A and TUMF have been invested on freeways projects to move more automobiles, but the State has shifted their focus toward more multi-modal transportation alternatives (bicycle, pedestrian, NEVs) that diversify our transportation system. CVAG’s ATP includes projects that provide multimodal transportation alternatives to automobiles and addresses the need to move towards compliance with State initiatives. Although this program may only be a small portion of the overall TPPS, it allows for the region to be in a better position to compete for state and federal funding when available. Total costs associated with bicycle and pedestrian improvements are less than 1% of the preliminary TUMF costs of $800 million. The very small percentage of total TUMF cost is due in part to the fact that ATP projects typically leverage a disproportionate amount of external funding. Additionally, most of the ATP projects contained within the TPPS support existing development.
Further reinforcing this philosophy, the CVAG Executive Committee recently approved investing $10 million in regional funding for ten (10) projects that directly address bicycle and pedestrian accidents and fatalities on CVAG’s Regional Arterials. These projects are scheduled to be under construction within the next year
TUMF Nexus:
The TUMF Nexus Study analyzes the relationship between the ultimate regional transportation system and the travel demand generated by future development. The result is a fee imposed onto new development to pay for its proportional contribution towards the future transportation system.
With the TPPS and accompanying documents approved, CVAG’s consultant team went to work establishing the TUMF parameters and assumptions which were presented at the December 2016 TUMF/Nexus Advisory Sub-Committee meeting.
With the maximum fee as a starting point, CVAG policy then determines what percentage of the maximum fee will be charged (based on economic and other considerations), with local match and other funding sources making up the difference.
The consultant team prepared a Technical Memorandum as a preface to the actual Nexus Study, describing the key assumptions and methodology underlying the calculation. They have included an initial calculation of the fee based upon current assumptions. The preliminary calculation of the maximum allowable fee is $751/trip, which equates to $7,145 per Single Family Dwelling.
Setting the fee at this level would be a substantial increase. At the same time, leaving the fee at its current level of $1,837 per Single Family Dwelling will not provide the necessary funding to fully implement the Regional Transportation System, which is largely designed to serve new development. By comparison, Western Riverside Council of Governments (WRCOG) TUMF fee is $8,873 per Single-Family Dwelling, resulting in a fee that is more than four times higher than CVAG’s current fee
CVAG staff met with City and County staff to evaluate reducing the preliminary maximum allowable fee by eliminating some of the projects from the TPPS over the 25-year horizon. This would reduce the overall TPPS costs and provide a lower TUMF fee. Historically, the TPPS, RACE and TUMF have been consistent; the Transportation Program has been fiscally constrained. To eliminate TPPS projects from funding consideration during the 25-year horizon would be a departure from CVAG policy. The TPPS would remain in place as a regional prioritization of projects, and would continue to be updated every five years, but there would no longer be an assumption that all the projects would be funded in a given time.
CVAG staff also has had discussions with the building industry organizations, Building Industry Association (BIA) and Desert Valley Builder’s Association (DVBA), to brief them on the progress of the TUMF update and to seek their input regarding the methodology and assumptions related to the TUMF update. CVAG received letters from both organizations. Notably, both organizations point to the need to reevaluate whether the projects being included in the TUMF would realistically be built in the next few decades.
Streamlining TUMF:
CVAG’s TUMF program is based on a land use classification category with the daily trip generation rate for that land use taken from the International Transportation Engineers Trip Generation Manual. Originally, CVAG’s TUMF Program had approximately seventy-five (75) land use categories, but it was later reduced to the current thirty-seven (37) land uses for simplification.
Based on the last TUMF update, CVAG has experienced several problems with some land uses, including the shopping center category. Shopping centers are defined as a development with three business establishments in one or more buildings with a total floor area of 10,000 sq. ft. minimum, and the largest building is not larger than 50% of the floor area. Shopping centers are considered retail/services for calculating TUMF. If a business establishment other than a restaurant is specifically listed in the TUMF formula and it's within a shopping center, TUMF is calculated as retail/services. For restaurants, a shopping center may include up to 25% restaurant use with no additional TUMF assessment. However, any restaurant uses beyond the 25% will be assessed under the restaurant category (Low Turnover, High Turnover, Fast Food).
By meeting this definition, specific high trip generating land uses such as convenience markets and fast food can pay at the general retail rate, which is approximately 10% of the convenience/fast food TUMF rate which is $54,611.26 per 1,000 sq. ft. There are several problems with the administration of the fee for “shopping centers,” including that neither the fee technicians nor the CVAG TUMF administrator know where all past shopping centers are located. Currently, there are small shopping centers that intend to build convenience stores with gas pumps and then expand at some future point in time. Tracking the timeline of these developments is difficult, and a high TUMF payment at first can be a burden for developers.
With this TUMF update, there is only one land-use category for retail development. The proposed new retail rate is 1/20th of the current rate for convenience markets, resulting in a dramatic reduction in the fee charged for that land use. Additional retail establishments on the same development would all be charged at the same, new rate per 1,000 SF. For convenience markets with fuel dispensers, an additional fee will continue to be added for each fuel dispenser. To distinguish between convenience stores where trip generation is primarily driven by the retail store and convenience stores where trip generation is driven primarily by the fuel dispensers, a calculation is made for the convenience store and the fuel dispensers, with the final rate set by the larger of the two calculations. While CVAG and WRCOG have different TUMF rates, this is the same methodology utilized by WRCOG in their determination of TUMF for convenience markets with fuel dispensers. The overall TUMF is greatly reduced for convenience stores with the new CVAG methodology and rate structure.
As part of the current update, CVAG also consolidates land uses (industrial, office, retail) to simplify the process by charging a fee on a stand-alone building based on square footage. Other land uses including single-family and multi-family will be charged per unit and hotels will be charged per room. As a comparison, WRCOG does not have a “shopping center” provision and does not have separate, higher TUMF for convenience markets and fast food. They are considered retail uses and pay a flat rate.
CVAG’s current TUMF Program includes several exemptions:
1. Low and lower-income residential housing.
2. Public buildings (public schools and public facilities) unless they are primarily leased for-profit enterprises.
3. Buildings used for religious purposes but excluding other commercial or residential properties or businesses owned by a religious institution.
4. Solar facilities are not charged on arrays, but buildings are charged specific rates (Industrial for maintenance or storage buildings or Office Building for office space).
Under the TUMF update, CVAG staff proposes that - except for affordable income housing -- these exemptions be eliminated. No other exemptions will be allowed unless required by law, and all land uses that generate new trips will be subject to TUMF.
Affordable Housing:
As part of its recommendation, CVAG staff was seeking guidance on how to address TUMF fees for affordable housing in the Coachella Valley. At their February 2018 meeting, the TUMF Nexus Sub-Committee raised concerns about TUMF for affordable housing as CVAG staff initially recommended no exemptions for any land use. The Sub-Committee directed staff to revisit this issue.
Regional fee programs approach affordable housing fees in a variety of ways, including charging a full fee, allowing reductions of a stated percentage, and completely exempting fees. These are evenly implemented throughout programs in the state. The Institute of Transportation Engineers Trip Generation Manual does not include affordable housing as a land use. Programs that charge a fee often simply define a reduction of 20% or 50% of the fee for affordable housing, but don’t provide a methodology on how it was arrived at other than it was a policy decision.
A case can be made for each scenario:
Full fee: Development adding trips to the system pays TUMF. Low-income housing
development pays market rates for land, construction and all municipal fees. Having the full fee reflects the development’s impact to the transportation system.
Fee reduction: Understanding that, at the margin, paying TUMF adds to the cost of the
development for single-family homes and has the potential to keep families from qualifying for financing. A 50% reduction, for example, is consistent with the program by the Fresno Council of Governments. Reducing the fee ameliorates this situation.
Exempt fee: Local anecdotal evidence suggests that for low-income single-family housing, families are relocating from poor, overcrowded living conditions in the Coachella Valley to new homes closer to employment. As their previous living situation is not likely to be backfilled with new families, the argument could be made that no new trips are added to the system, justifying an exemption.
Legally, any reduction or exemption cannot be made up by charging higher fees to other land uses; it is simply lost revenue to the TUMF program. Staff recommended the committee consider the following rates and the associated loss of TUMF funding.
Single-family dwelling
Full Rate: $2,313 per unit
50% Reduction $1,156 per unit
Exemption: $0
Affordable housing dwelling units average 9.5% of all housing units in the Coachella Valley. Almost all these units are multi-family. For the period of FY 2011/12-FY 2015/16, had affordable housing been assessed TUMF, the amount would have accounted for 4.5% of the total TUMF collected; in 2016/17 that would equate to $138,778 if charged the full current TUMF rates.
The Transportation Committee discussed Affordable Housing at their April 2nd, 2018 meeting, and recommended that CVAG continue with the current exemption for Low Income Housing and directed staff to develop data on the ramifications of that policy directive. Staff would then analyze the collected data and report back to CVAG committees at a future date.
Inflation:
CVAG’s current TUMF Program does not have an inflationary adjustment factor. As part of the TUMF update, CVAG is proposing an annual inflationary adjustment to the final TUMF fee. CVAG proposes to utilize the Consumer Price Index, like the inflation factor that was approved for the Coachella Valley Multiple Species Habitat Conservation Plan (CVMSHCP). In discussions with stakeholders, representatives of both the BIA and DVBA expressed support for a fee adjustment but are opposed to an automatic annual adjustment. CVAG staff proposes the annual inflation factor since TUMF revenues have decreased drastically over the last ten years. While the economy is not back to its strength it was 10 years ago, the inflation adjustment will bring in some minimal revenues that would help further offset the cost of regional improvements. Incorporating an annual inflation adjustment may help to forestall the expensive necessity of a full TUMF Nexus Study.
The building industry organizations are not opposed to the inflation adjustment but would like it to be visited on annual basis and not be an automatic increase. CVAG Staff concur that the inflation adjustment should be evaluated by the Executive Committee on an annual basis to determine whether to apply the inflation factor to the TUMF program.
WRCOG’s TUMF Program also includes an inflation factor for the TUMF. The inflation factor is not automatic and is considered by its Executive Committee on an annual basis.
FISCAL IMPACT:
Approval of the 2018 TUMF Ordinance will allow the new TUMF fee structure to be implemented. The new TUMF includes an increase in the overall trip rate from $192/trip to $245/trip. This increase will result in additional TUMF revenue to fund future regional transportation projects
Based on the new Handbook and trip rate the TUMF for a single-family home would go from $1,828 to $2,310/dwelling unit.
Based on the new Handbook and trip rate the TUMF for a multi-family dwelling would go from $1,196 to $1,330/dwelling unit.
Development occurs within many different land uses. In previous TUMF Handbooks, CVAG has utilized as many as 70 land-use categories. Based upon feedback from CVAG’s TUMF Advisory Committee, there was consensus that consolidating the land-use categories would simplify the process without impacting the amount of TUMF collected. CVAG has aggregated the land use categories and the newly adopted TUMF Handbook only utilizes twelve categories and their associated TUMF fee is illustrated as follows:
Land-use Category Fee per Unit
Residential
Single-Family Detached $2,310/dwelling unit
Multi-Family, Mobile Home $1,330/dwelling unit
Nursing/Congregate Care $ 495/dwelling unit
Transit Oriented Development 15% discount
Low-Income Housing Exempt from Fee
Non-Residential
Industrial $1,215/1,000SF
Office $2,390/1,000SF
Retail $6,010/1,000SF
Fuel - Gas $8,610/dispenser
Fuel - Electric $ 91/dispenser
Golf Course $ 920/acre
Hotel $3,510/room
ATTACHMENTS:
Proposed Ordinance
TUMF Technical Memorandum
Public Hearing Notice