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City Desk: Jan. 28, 2015

Less is More: Doing the Math on Residential Development Fee Credits
By Carolyn Schuk

When Santa Clara’s residential development impact fee, the Parkland Dedication Ordinance, was approved last year, there was one provision that created continuing confusion: the prerequisite donation of one acre of land in order to apply for a fee reduction based on amenities in the development – for example, playgrounds and pools.

After two previous discussions on the subject, at its Jan. 13 meeting, the City Council voted 4-3 to drop the requirement, with Council Members Debi Davis, Lisa Gillmor and Teresa O’Neill opposing.

Many left that meeting thinking the City had just given away acres of potential public parks.

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It may seem counterintuitive, but eliminating the land donation prerequisite delivers more money and land to the City – nothing’s being given away. And without the one-acre prerequisite, the City gains important flexibility to invest in facilities that best serve citywide needs and interests, in optimal locations. “We can use the money to improve existing facilities or pool it for bigger pieces of property to build bigger parks, versus getting a lot of disconnected one-acre pieces,” explained City Manager Julio Fuentes. The standard size for a neighborhood park is 1.5 acres.

The fee is calculated based on the number of residents, the amount of park acreage required by law per 1,000 residents and the current value of land – and that value can be adjusted by the City Council, as market conditions change. The money must be used within five years.

The 50 percent credit only applies to the acreage of qualifying amenities and public parkland – not the entire fee. A developer wanting to cancel out the fee altogether would have to dedicate twice the required acreage.

In addition, developers can’t simply plant flowers next to a sidewalk, call it open space and get a credit. Amenities have to meet certain specifications established by California law that allows the fees to be levied in the first place. To be considered, the development must have at least three-quarters of an acre of qualifying open space and recreational amenities.

“It can’t just be a narrow strip of land that no one wants,” said Parks & Recreation Director Jim Teixeira. Santa Clara’s Central Park is 52 acres. “Some of the things private developers can’t provide are facilities like ball fields. Even the ideal acre isn’t going to get you the ball field you need.”

Though the fees didn’t go into effect until last summer, and only apply to residential construction projects initiated after that time, some developers have voluntarily offered to pay into the fund, including $3.6 million from Irvine’s Monticello project, and $4.7 million from Essex’s proposed Santa Clara Gateway (Kohl’s plaza) project, according to Fuentes. “Over the last 20 years, nothing was contributed by developers [for new parks]. Now we have $4.7 million in that fund. Silicon Sage has put in $169,000 [Downtown Gateway] – that’s a new playground.”

The incentive effect can already be seen in the design for a 2,000 unit residential neighborhood that Irvine unveiled last week as the third phase of its Santa Clara Square development at Bowers and Augustine. The most conservative estimate of required parkland is at least 10 acres – initially a $57 million bill for the developer at the current land cost in the 95054 zip code, $5.7 million/acre.

Irvine’s preliminary design includes some 30 acres of open space, including a public park, ball field and Redwood walk that connects to the San Tomas Aquino Creek trail.

The objection to dropping the land dedication requirement is that land is a finite resource and increasing land prices will outpace cash – since 2010 real estate prices have about doubled. As long as the building continues, City income from the park fees will continue to flow. But when construction slows, revenue will too, and the park fund reserve could stagnate even though real estate prices could continue to rise.

A second question is where the land for new parks will be found; although that task will be equally hard regardless of who’s buying it.

“We’re going to have a huge problem finding land,” said Gillmor at the Jan. 13 meeting. “I’d like to keep the [one-acre] requirement for larger developments, yet still have the cash to acquire larger parks. I want to see a blending, understanding that the smaller projects won’t have the opportunity to do this. I want to see how we plan to use this money.”

One way of finding new parkland is beginning to gain traction in cities that have run out of real estate: elevated parks over the city. In 1993, Paris opened the greenbelt Promenade Plantée, built on top of an obsolete railroad. In 2006, Manhattan – where real estate prices currently average about $1,700 a square foot – began creating the High Line Park over the abandoned West Side Line of the New York Central Railroad. The linear park is integrated into Hudson Yards, a new neighborhood being built by the Related Company on top of a working railroad yard.

Closer to home, a similar idea is part of the concept for Santa Clara’s proposed new Swim Center complex, in the form of a second story landscaped outdoor plaza and walkway. Not only does this provide a “green” roof, the conceptual design also reduces the complex’s footprint, providing more open space in Central Park.

Rebuilding Santa Clara’s George Haines International Swim Center has been in the City’s long-term plan for many years, but remained a “someday” plan because there was no money for it. Revenue from the development fees will help fund the project in the near-term. The fees may also be the way to find the additional soccer fields the City needs.

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