The Menlo Park City Council is considering more than tripling fees for new office, retail and restaurant space and more than quadrupling fees for hotel, manufacturing and medical office uses to pay for new transportation infrastructure.
The council is scheduled to hold a public hearing on the proposed new fees at its Tuesday, Nov. 19, meeting. If it's approved then, a second reading and formal adoption of the ordinance could happen on Dec. 10.
At a Nov. 5 meeting, the council accepted the findings of a "nexus study," a complex analysis of what new demands a proposed development - or in this case, set of developments permitted under changed zoning laws - will produce on the city's transportation infrastructure.
The study then broke down, into a per-square-foot or per-unit dollar amount, what the city could charge to pay for new infrastructure. But whether to charge the maximum amount for all uses, or to lower those fees to stay competitive with other cities and incentivize some uses – which could be at the expense of generating much-needed local transportation funding – was the question at the root of the council's discussion.
According to Mark Spencer, principal at transportation consulting firm W-Trans, which has been developing the city's transportation master plan, doing the nexus study and drafting the potential transportation impact fee list, impact fees can be used for new arterial streets, sidewalks, bike lanes and multimodal projects, but can't be used for existing road needs, deficiencies, operations or maintenance.
Fees can also be used toward a city's required contribution for regional transportation projects, typically set at 12% of the project's cost.
As he explained it, there's some wiggle room for city councils to set transportation impact fees, but they can't go higher than the maximum allowable fee. And there may be compelling reasons to keep those fees lower.
For instance, the nexus study calculates that the city could charge 30 times its current rate per square foot for restaurant space, 34 times its current rate for child care space and 11 times its current rate for retail space. (The current rates are also set lower than the maximum.)
However, given the significant child care shortage on the Peninsula and the council's expressed desire to attract eateries and shops to enliven the city's downtown area, raising the fees so high could deter developers from constructing buildings for such uses, especially when compared with nearby cities with lower impact fees. Still, the proposed fee schedule would increase new restaurant, office and retail use to $17.60 per square foot, up from the current $5.01.
The study found the city could charge developers as much as $15,150 for a new single-family home, or $8,570 for a new apartment, but because of the need for more housing, staff recommended the city charge half of those amounts.
However, such fees would still be more than double the current rates. Staff also recommended waiving the fee for secondary housing units entirely. The current fee is $772, and under the study, the maximum the city could charge is $3,450.
On the other hand, even if the city charged the full maximum fee rates for all uses, it could generate only about $77.5 million, based on which projects would be eligible for impact fee funding, which is still far below the estimated $164 million needed for outstanding projects, explained Spencer.
One question the study brings up is what to do with proposed developments that have been approved but haven't had their transportation impact fees paid or building permits pulled. Staff recommended grandfathering the residential and mixed-use proposals in under the current fee rates, but requiring developers behind office and hotel proposals to pay the new rates once they are finalized.
In addition, a subcommittee made up of Councilwoman Betsy Nash and Vice Mayor Cecilia Taylor will meet with staff to come up with some alternatives for potentially lower rates for child care, retail and restaurant uses.