Fremont City

Staff Report

DEVELOPMENT IMPACT FEE ANNUAL REPORT AND PROPOSED INCREASE IN FEES - Public Hearing (Published Notice) to Consider the Development Impact Fee Annual Report for Fiscal Year 2018/19 and an Increase in Development Impact Fees in an Amount of 2.52%


Department:Public WorksSponsors:
Category:Fees & Rates

Item Discussion

Executive Summary: The purpose of this report is to comply with California reporting requirements for development impact fees and to implement a 2.52% fee adjustment based on construction cost escalation.




Annual Report


The Mitigation Fee Act (MFA), California Government Code Sections 66000, et seq., establishes requirements for annual reporting of receipts and expenditures of development impact fees. The annual report is attached and include the following:


1.            A brief description of the type of fee in the account;

2.            The amount of the fee;

3.            The beginning and ending balance of the account for the fiscal year;

4.            The amount of fees collected;

5.            The interest earned;

6.            Identification of each public improvement for which fees from the account were expended and the amount of expenditures on each improvement, including the percentage of the cost of the improvement that is being funded with impact fees;

7.            Identification of an approximate date by which construction of the public improvement will commence if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement and the public improvement remains incomplete;

8.            Description of each inter-fund transfer or loan made from the account, including the public improvement on which the transferred or loaned fees will be expended; and

9.            The amount of any refunds made pursuant to statute.


Annual Adjustment


The development impact fees were last comprehensively updated in May 2015 to reflect the development horizons of the 2011 General Plan and the Warm Springs Community Plan.

Development impact fees are established in conformance with the requirements of the MFA. Fees established under the MFA are used to fund public facilities needed to serve new development. Impact fees cannot, however, be used to correct existing deficiencies or for the ongoing operation and maintenance costs of these facilities. Impact fees are typically paid by developers at the time of building permit issuance.


Fremont Municipal Code Chapter 18.290 provides the regulatory framework for the adoption, implementation, and adjustment of the development impact fees. As part of this framework, FMC Section 18.290.100(a) provides that adjustments to the estimated construction costs of the public facilities in the fee program may occur in accordance with an inflation index.


In April 2017, City Council directed staff to recommend an adjustment to the development impact fees for its consideration as part of the impact fee annual review, based on changes in the Engineering News Record-Construction Cost Index (ENR-CCI) for the San Francisco area. ENR-CCI is a construction inflation index that reflects the range of public facility improvement projects in the development impact fee program.


The annual adjustment of development impact fees will continue until the next comprehensive update to the development impact fees which is anticipated to occur in 2020.




Development Impact Fees 2018/19


The overview and body of the attached Annual Report addresses the reporting requirements. As noted in the overview section of the report, it is not possible to precisely identify the anticipated date of construction of public improvements (requirement seven). Fremont collects fees in each fee category to fund improvements needed to serve the City’s population through General Plan build-out as identified in the nexus studies. Specific improvement projects are not identified in the nexus studies, except for the traffic impact fee program. Although the City does not earmark impact fees for any specific project as the fees are collected, the City does identify the projects on which impact fees are allocated in the City’s Five-Year (2019/20-2023/24) Capital Improvement Program (CIP) adopted by the City Council on June 11, 2019. The CIP is a comprehensive planning document that applies the fees toward the completion of a multi-project capital improvement program with varying timelines. The City’s Capital Improvement Program (CIP) provides detail regarding the sources, amounts, and approximate dates of funding anticipated over a five-year period that will be used to complete the financing of future projects funded with parkland fees, park facilities fees, traffic impact fees, fire facilities fees and capital facilities fees.


The Mitigation Fee Act (“MFA”) findings are not required this year. Government Code Section 66001(d) requires the Council to make certain findings with respect to unexpended impact fees every five years following the first deposit into the fee account. These findings were made with the acceptance of the FY 2014/15 Impact Fee Annual Report by the City Council on February 2, 2016, therefore the next set of findings will be included in the FY 2019/20 Annual Report.


Annual Adjustment of Development Impact Fees – Effective July 1, 2020


As described, Council directed staff to recommend an adjustment to the development impact fees based on the changes in the ENR-CCI for the San Francisco Area, at the time of the annual impact fee review. Fees were approved to increase on December 18, 2018 in an amount of 2.78%, per resolution number 2018-73 and were effective July 1, 2019. (See Informational No. 1.). In 2019 (to date), the ENR-CCI has increased 2.52%. State law requires a minimum 60-day period prior to implementation of MFA fees after Council adoption. Therefore, staff recommend the annual adjustment of 2.52% to the development impact fees to be effective on July 1, 2020, which is more than the 60 days required by the MFA. Proposed development impact fees are provided in Exhibit A.


PUBLIC NOTICE:  A public hearing notice was published in the Tri-City Voice on November 26, 2019. Additionally, email notification to the public was sent to approximately 1,441 subscribers listed on the City’s eNews Notify Me of the Builder’s Interest list on November 26, 2019.


FISCAL IMPACT: The proposed adjustment of 2.52% to the development impact fee would ensure that new development is adequately funding its share of the costs of new public facilities as the costs to construct these projects increase over time. The annual adjustment to the impact fees provides for fees that better reflect construction cost increases to ensure the City does not subsidize new developments share of these facilities and that adequate funding is available when the City is ready to construct the projects.


An administrative fee collected as part of each impact fee funds staff costs related to administering the development impact fee program. The administrative fee is 2% of the revenue collected on each fee.


ENVIRONMENTAL REVIEW:  The proposed mitigation fee adjustment is exempt from review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3), which is the general rule that CEQA applies only to projects with the potential for causing direct or indirect significant environmental effects. The proposed fee adjustment is also exempt from review under CEQA Guidelines Section 15183, Projects Consistent with a Community Plan, General Plan, or Zoning. The proposed annual adjustment of 2.52% percent to the development impact fee is an implementation of the adopted General Plan for which final Environmental Impact Reports (EIRs) were previously certified as follows: for the General Plan EIR (SCH#2010082060), Final Supplemental EIR for the Downtown Community Plan (SCH#2010072001 and SCH#2010082060), and the Final EIR for the Warm Springs/South Fremont Community Plan (SCH#2013032062). As there have been no subsequent changes or new information of substantial importance related to those documents, no further environmental review is required.

Document Comments


1.              Accept the Development Impact Fee Annual Report for Fiscal Year 2018/19.

2.              Hold a public hearing regarding the proposed impact fee adjustment.

3.              Find that the proposed impact fee adjustment is exempt from review under the California Environmental Quality Act (CEQA).

4.              Adopt a resolution approving a 2.52% increase in development impact fees for the City’s capital facilities, fire facilities, park facilities, parkland, and traffic programs to reflect construction cost changes in 2019, effective July 1, 2020.