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City Observer: Feb. 17, 2016

City Observer

Soccer Gets 70% of Budget for City Athletic Facilities

Of the $9.8 million Santa Clara has budgeted for athletic facility construction and improvements this year, $6.8 million is earmarked for soccer fields – just under three times what will be spent on all other athletic facilities ($3.5 million), according to a recent report by the City.

The City budgeted $5.6 million this year to develop new youth soccer fields as well as $1.2 million for replacing Field 2 and converting the turf on Field 3 at the Youth Soccer Park. Of the remaining capital expenditures for the year, $1.7 million will go to maintenance of the International Swim Center and other City pools; $200,000 will go for maintaining Elmer Johnson, Townsend, and Washington athletic fields; and $165,000 for tennis court resurfacing.

This year the City will also spend $410,000 for a new roof and electrical refurbishment at the Senior Center, and $50,000 for maintenance and operation of the Mission City Center for the Performing Arts (Wilcox High School theater); which the City and Santa Clara Unified built jointly, with the intention of providing equal access for the school district and local performing groups.

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Council Establishes Task Force to Figure Out How to Calculate Development Fees

At its Jan. 12 meeting, the Santa Clara City Council was to consider, and it seemed likely approve, increasing Santa Clara’s residential development impact fees an average of 36 percent – from 24 to 48 percent depending on the zip code, type of development, and applicable state law.

The basis for the increase was Schmidt-Prescott Group’s September 2015 appraisal report, which estimated Santa Clara land values at about $5 million an acre. The 2014 ordinance establishing the fees requires the Council to periodically set the land value that’s used for calculating the fees. It’s not an automatic escalation.

The Building Industry Association Bay Area (BIA), the California Apartment Association (CAA), and developer Westlake Urban – which is currently bidding on property for the future Lawrence Station development – objected to the valuation, saying that the appraisal methodology was faulty for several reasons.

First, the BIA contended that the hypothetical basis of the appraisal – a one-acre, rectangular lot fully fronting on a regular city street – was “inconsistent with what the reality of city parkland acquisitions and existing inventory.” Many parks don’t conform to this description – the San Tomas Aquino Creek Trail is a linear park – and many have little street frontage (Parkway Park, Mary Gomez Park).

Further, the BIA said that many of the transactions used to develop the values were as much as five years old and pre-dated the parkland fees – so they didn’t reflect the impact those fees may have had on prices – and important recent sales transactions weren’t included in the calculations.

And finally, said the BIA, the new rate would result in an exorbitant and unprecedented fee increase. For example, it would raise Westlake’s fees 40 percent over the estimate that the builder got from the City in October.

As a result, said BIA government affairs specialist Dennis Martin, “appraisal values are overstated by 30 percent. We think the average cost for acquiring park and recreational land is $3.3 million – which is comparable to that of neighboring cities.”

Schmidt-Prescott calculated the land value using an average of 1,160 qualifying medium-density residential, commercial and industrial real estate transactions from 2011 through 2014, weighted by the number of sales, and adjusted by “transactional” factors such as location, buyers’ special interest in the property, and unusual costs. None of these adjustments lowered prices. The unadjusted prices per square foot ranged from $96 – $98 for residential property to $29 – $47 for industrial property.

The Council continued the subject to the Jan. 26 meeting, to allow further analysis of the appraisal data.

This precipitated a letter-writing campaign, organized by Palo Alto-based advocacy group, Committee for Green Foothills, to “tell Santa Clara City Council to Protect Parks,” because “developers are pushing councilmembers to reduce these fees by >35%. This would leave the city without adequate funds … for new parks.”

Green Foothills’ replied to the BIA’s assertions that the BIA only called out excluded transactions whose price per square foot was significantly lower than Schmidt-Prescott’s average value, and were much larger than a typical park, and thus less expensive per square foot than property the City would be buying.

“It is a simple fact that land values have risen dramatically in the 2 years since the study that established the fee schedule,” wrote Green Foothills legislative analyst Alice Kaufman. Further, she noted the fee ordinance allows developers to donate parkland in lieu of fees and ask for fee reconsideration.

On Jan. 26 it seemed like the Council would approve the recommended fee increases,  until Council Member Pat Kolstad proposed a task force “to study this issue further – looking at the fairness of how money is collected, where the money goes, ” he said. “There are still unanswered questions about the methodology used in the appraisal process. I feel there really is a need for more study.”

The Council voted unanimously to adopt Kolstad’s proposal and appoint a committee that included open space advocates, the Parks and Recreation department, and businesses. The task force was instructed to reach “consensus, not just majority rule,” and do so in 90 days or less.

“I hope we can move fairly expeditiously,” said Council Member Teresa O’Neill. “The data that we got shows that there’s been a considerable increase in land value.”

“This is probably something that should have happened last year,” said Council Member Lisa Gillmor. “It’s important that we don’t have to face this year after year  [because] every year people are going to question the methodology. The importance of an appraisal is the instructions that we give an appraiser.”

Nonetheless, at least one long-time City Hall observer doubts that the question will be put to bed, saying, “They will be coming back for reconsideration every year.”

It’s hard to know how much money Santa Clara needs for parkland development because the City lacks a park development strategy or parkland acquisition plan.

City staff recommendations, Schmidt-Prescott’s report (tinyurl.com/gtnpfva ) and the BIA’s analysis (tinyurl.com/jclln7e) can be found in the Dec. 15, 2015 Council Meeting packet.

An “Outsider” Found Money for New Santa Clara Parks “Insiders” Never Looked For

Santa Clara doesn’t now have – and hasn’t had for about 30 years – adequate funds to acquire new parkland. However, it wasn’t advocacy groups, environmental activists, the City Council or City residents who proposed Santa Clara’s development impact fees to change that.

It was City Manager Julio Fuentes, who joined the City in 2012.

Before 2014, Santa Clara last evaluated its “recreation tax” on new construction in 1969, when the City set a $10 tax for the first bedroom and $5 for additional bedrooms. In 2014, the City was still collecting the same $15 and $5 fees –the equivalent of $2.28 and $0.76 in 1969 dollars.

Even at 1969 land prices, it was impossible for those fees to pencil out to the City’s standard 2.4 acres of parkland per 1,000 residents. But before Prop 13 capped property taxes, escalating property value – and high rates of new development – meant escalating revenue. Ten years later the party ended.

In 1979 Prop 13 cut municipal property tax revenues by about 60 percent and made it difficult for cities to pass new tax or bond measures. An economic depression beginning in 2001 and a subsequent real estate crash in 2008, froze new development and sent tax revenues tumbling. Finally, the RDA dissolution in 2011 deprived Santa Clara of $14 million of annual land lease revenue. When growth resumed around 2012, the price of an acre of had topped $3 million.

In the 1970s and 1980s, the California legislature established development impact fees specifically to enable municipalities to acquire land for parks and public amenities. But Santa Clara didn’t utilize this park funding mechanism. In 2014 neighboring cities were netting hundreds of thousands and millions from such fees, while Santa Clara collected $800.

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