SUBJECT: Implementation of an Alternative Method to Calculate Fair Market Value for Determining Park In-Lieu Fees (1999-0009).

Ordinance Amending Title 18 and Title 19 of the Sunnyvale Municipal Code pertaining to Park In-Lieu Fees.

Resolution Amending Resolution No. 166-99, The Master Fee Schedule, to add Section 3.12 establishing the Fair Market Value Per Acre of Land in the City of Sunnyvale for the purposes of Park In-Lieu Fees.

The purpose of this report is to detail the actions necessary to implement a new methodology for determining fair market value. The fair market value will then be used in calculating the Park In-Lieu Fee for residential development projects.

The actions recommended by this report are in response to the City Council’s direction of October 19, 1999 (See Minutes Attachment A) for:

1. the Director of Community Development to prepare an average fair market value for residentially zoned property as part of the annual Fee Resolution;
2. prepare an ordinance amending Titles 18 and 19 of the Sunnyvale Municipal Code on the preparation of an annual fair market value for residentially zoned property. Ordinance 1999-0009 – Amending Titles 18 and 19 of the Sunnyvale Municipal Code (Attachment C) will implement the Council’s direction.
3. prepare a resolution for the determination of an average fair market value of residentially zoned property to serve for the remainder of the fiscal year; Resolution "Amending Resolution No. 166-99, The Master Fee Schedule" (Attachment B).

Implementation of the proposed actions will streamline and simplify the calculation of park in-lieu fees for future residential development projects.

This Study Issue item evolved from the identification of the need for clarity in establishing park in-lieu fees for residential development. The concern was raised by staff who administer the fee collection process. The specific area of concern relates to the need to establish a fair market value for the land to be developed, in order to determine the fee to be charged in lieu of land dedication, if land dedication is not desirable or feasible. Arriving at a fair market value which is agreeable to both the City and the developer has sometimes become contentious and time consuming for both the project proponent and for staff. The issue paper suggested that alternative methods for determining park in lieu fees be investigated and considered for implementation. Council ranked this issue 7 of 7 issues to be addressed by Community Development staff in 1999.

On September 28, 1999 the Planning Commission considered this item. The Commission recommended approval of the proposed actions in a 5-1 vote (five in favor, one opposed and one absent). No testimony was offered at the hearing.

On October 19, 1999 the City Council approved the proposed actions in a 6-0 vote (Councilman Kawczynski absent). The Council’s action required staff to prepare the implementing Ordinance and Resolution for final City Council approval.

There are two methods of providing for park facilities for new residents.

• A portion of the land development can be dedicated for park facilities.
• A fee can be paid to the City to be used for acquisition and development of park and recreational facilities.

The proposed actions will revise the methodology used to determine in-lieu fees but will not effect those situations where land dedication for park purposes is proposed.

Implementation of the proposed actions will require the Director of Community Development to determine a fair market value as part of the annual fee resolution. The fair market value is part of the formula used to calculate the total in-lieu fee. The methodology used to determine fair market value will employ, where appropriate, comparables (comps), real estate valuation trends analysis, past precedent and other recognized property appraisal techniques. Because the fair market value will be part of the fee resolution, the City Council will have over-sight to ensure that the number is an accurate assessment of current land value.

The total amount of Park In-lieu fees collected by the City may vary slightly from that collected under current methodology. An exact determination of the extent total fees may vary cannot be calculated, however, staff believes that the difference, if any, would be statistically insignificant.

The Agenda for this hearing was posted on the City of Sunnyvale’s Website and recorded for Sundial. The staff report for this project was posted on the City of Sunnyvale’s Website and a copy of the report was provided at the Reference Section of the City of Sunnyvale’s Public Library.

Over the course of this study, city staff has contacted a cross-section of residential developers to discuss proposed changes to the determination of fair market value and the calculation of park in-lieu fees. All of the developers supported the general idea of an established fair market value in that it allows the calculation of the in-lieu fee to be made very early in the plan review process. With an established value in place, the exact park in-lieu fee can be clearly identified in a project’s conditions of approval. The developers also noted that care must be taken in calculating the annual fair market value because land values can change considerably from year to year.

This item was considered by the Planning Commission at a regularly scheduled public hearing on September 27, 1999. The Commission discussed the item and recommended that the City Council adopt Alternative No. 1 allowing for the preparation of a fair market value for residentially zoned property as part of the annual Fee Resolution. The vote was 5-1 with the dissenting Commissioner preferring Alternative No. 3.

The City Council considered this item at a regularly scheduled public hearing on October 19, 1999. Notice of this public hearing for the project was published in the Sun Newspaper. The staff report was posted on the City of Sunnyvale’s Website and a copy of the report was provided at the Reference Section of the City of Sunnyvale’s Public Library. The City Council Agenda was posted on the City of Sunnyvale’s Website and recorded for SunDial. The City Council approved the proposed actions in a 6-0 vote (Councilman Kawczynski absent).

Alternative 1

Prepared by:

Fred Bell
Principal Planner

Reviewed by:

Trudi Ryan
Planning Officer

Reviewed by:

David S. Boesch
Director, Community Development

Approved by:

Robert S. LaSala
City Manager