News

Palo Alto hikes development 'impact fees' for first time in 20 years

Costs cover operations at parks, libraries, community centers

An apartment complex under construction at the intersection of Page Mill Road and El Camino Real in Palo Alto on April 14, 2021. Photo by Magali Gauthier.

Developers looking to build in Palo Alto will have to pay significantly more to support local parks, libraries and community centers under a fee revision that the City Council voted to adopt on Monday.

By a 6-1 vote, with council member Greg Tanaka dissenting, the council agreed to overhaul its "impact fees" for new developments, which includes both commercial and residential projects.

The most significant change pertains to park fees, which for residential projects currently range from $4,116 for a small apartment or condominium to $18,570 for a single-family home with more than 3,000 square feet of floor area (smaller homes are required to pay a fee of $12,436). Under the revised fee schedule, a builder of any single-family home would have to pay $57,420 in park fees, while multifamily developers would pay $42,468 per unit.

While park fees represent by far the largest change, impact fees for libraries and community centers are also going up. Today, a single-family home pays $3,321 in community center fees and $1,126 in library fees. These would go up to $4,438 and $2,645, respectively, under the new schedule.

Overall, someone building a single-family home would have to pay $64,504 in impact fees for the three categories, up from the current level of $16,883. For a small unit in a multifamily residence, the total cost goes up from $5,557 to $47,707.

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Commercial developers would have to pay $18,914 per 1,000 square feet in impact fees, while hotels would be assessed $3,322 per 1,000 square feet. That's up from current levels of $5,863 and $2,641, respectively.

The new numbers are based on a study that the city had recently commissioned as part of its effort to revise its fees for the first time in 20 years. The study from the firm DTA evaluated local values and the costs of providing and maintaining parks, libraries and community centers before calculating how much it would take to support new amenities without degrading existing levels of services.

Developers will face higher impact fees in Palo Alto to support libraries, parks and community centers under a revised schedule approved by the City Council on April 12, 2021. Photo by Magali Gauthier.

"The idea is that as new residents and new employees come, you need to attach the same level of service to those folks," said Nate Perez, managing director of DTA. "If you don't do it, the level of service to the resident group will be deteriorated and you will see the degradation to your inventory of assets and things of that nature."

In approving the changes, council members suggested that even the new fees may not be enough to cover the city's costs, particularly for parks. In assessing the fair market value of Palo Alto land, the firm settled on the figure of $5.7 million per acre. Vice Mayor Pat Burt was among those who argued that the figure is far too low and pointed to recent land sales — including the 2017 purchase of the Buena Vista Mobile Home Park by the Santa Clara County Housing Authority for $40.4 million — for evidence.

Burt argued that as the city explores the creation of new multifamily projects to meet both local and state housing goals, the neighborhoods where these developments will occur will require new parkland.

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"I think we ought to have market-rate projects be able to pay for that," Burt said. When we have density, it's not supposed to be at the detriment of the community values and services that are presently provided."

Council member Lydia Kou said she was shocked to learn that the fees haven't been updated in two decades. She also suggested that the DTA study underestimates the number of employees that occupy new commercial developers. The council voted 5-2, with Tanaka and council member Alison Cormack dissenting, to further evaluate employee densities and land values over the coming year. It also requested that the city evaluate a fee structure that differentiates between retail and other commercial developers.

Tanaka, who opposed both the analysis and the Monday revision, suggested that hiking the fees so sharply will discourage construction, including of much-needed affordable housing. He also noted that the city has seen its revenues plunge — and its vacancies rise — over the past year.

"I do wonder if our intent is to actually create more affordable housing," Tanaka said. "My impression is that there's not a lot of people clamoring to develop in our city, per se."

Cormack supported a more moderate approach: phasing out the fee increase over a two-year period. That proposal failed by a 2-5 vote, with only Tanaka joining her.

"These are big changes. … I think it's reasonable to provide an on-ramp," Cormack said.

Council members largely agreed, however, that the current fees are outdated and far too low. Mayor Tom DuBois suggested that raising them will help the city obtain funding for some of the items in the city's Parks and Recreation Master Plan.

"These fees go right to the quality of life for residents and they're going to be needed as our population grows," DuBois said.

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Palo Alto hikes development 'impact fees' for first time in 20 years

Costs cover operations at parks, libraries, community centers

by / Palo Alto Weekly

Uploaded: Thu, Apr 15, 2021, 9:13 am

Developers looking to build in Palo Alto will have to pay significantly more to support local parks, libraries and community centers under a fee revision that the City Council voted to adopt on Monday.

By a 6-1 vote, with council member Greg Tanaka dissenting, the council agreed to overhaul its "impact fees" for new developments, which includes both commercial and residential projects.

The most significant change pertains to park fees, which for residential projects currently range from $4,116 for a small apartment or condominium to $18,570 for a single-family home with more than 3,000 square feet of floor area (smaller homes are required to pay a fee of $12,436). Under the revised fee schedule, a builder of any single-family home would have to pay $57,420 in park fees, while multifamily developers would pay $42,468 per unit.

While park fees represent by far the largest change, impact fees for libraries and community centers are also going up. Today, a single-family home pays $3,321 in community center fees and $1,126 in library fees. These would go up to $4,438 and $2,645, respectively, under the new schedule.

Overall, someone building a single-family home would have to pay $64,504 in impact fees for the three categories, up from the current level of $16,883. For a small unit in a multifamily residence, the total cost goes up from $5,557 to $47,707.

Commercial developers would have to pay $18,914 per 1,000 square feet in impact fees, while hotels would be assessed $3,322 per 1,000 square feet. That's up from current levels of $5,863 and $2,641, respectively.

The new numbers are based on a study that the city had recently commissioned as part of its effort to revise its fees for the first time in 20 years. The study from the firm DTA evaluated local values and the costs of providing and maintaining parks, libraries and community centers before calculating how much it would take to support new amenities without degrading existing levels of services.

"The idea is that as new residents and new employees come, you need to attach the same level of service to those folks," said Nate Perez, managing director of DTA. "If you don't do it, the level of service to the resident group will be deteriorated and you will see the degradation to your inventory of assets and things of that nature."

In approving the changes, council members suggested that even the new fees may not be enough to cover the city's costs, particularly for parks. In assessing the fair market value of Palo Alto land, the firm settled on the figure of $5.7 million per acre. Vice Mayor Pat Burt was among those who argued that the figure is far too low and pointed to recent land sales — including the 2017 purchase of the Buena Vista Mobile Home Park by the Santa Clara County Housing Authority for $40.4 million — for evidence.

Burt argued that as the city explores the creation of new multifamily projects to meet both local and state housing goals, the neighborhoods where these developments will occur will require new parkland.

"I think we ought to have market-rate projects be able to pay for that," Burt said. When we have density, it's not supposed to be at the detriment of the community values and services that are presently provided."

Council member Lydia Kou said she was shocked to learn that the fees haven't been updated in two decades. She also suggested that the DTA study underestimates the number of employees that occupy new commercial developers. The council voted 5-2, with Tanaka and council member Alison Cormack dissenting, to further evaluate employee densities and land values over the coming year. It also requested that the city evaluate a fee structure that differentiates between retail and other commercial developers.

Tanaka, who opposed both the analysis and the Monday revision, suggested that hiking the fees so sharply will discourage construction, including of much-needed affordable housing. He also noted that the city has seen its revenues plunge — and its vacancies rise — over the past year.

"I do wonder if our intent is to actually create more affordable housing," Tanaka said. "My impression is that there's not a lot of people clamoring to develop in our city, per se."

Cormack supported a more moderate approach: phasing out the fee increase over a two-year period. That proposal failed by a 2-5 vote, with only Tanaka joining her.

"These are big changes. … I think it's reasonable to provide an on-ramp," Cormack said.

Council members largely agreed, however, that the current fees are outdated and far too low. Mayor Tom DuBois suggested that raising them will help the city obtain funding for some of the items in the city's Parks and Recreation Master Plan.

"These fees go right to the quality of life for residents and they're going to be needed as our population grows," DuBois said.

Comments

Allen Akin
Registered user
Professorville
on Apr 15, 2021 at 9:40 am
Allen Akin, Professorville
Registered user
on Apr 15, 2021 at 9:40 am

Good moves, and long overdue, though I agree with Vice Mayor Burt that the land-value estimate is too low. As density increases the price of land will also increase, so it makes no sense to set the starting point too low.

I'm really interested in seeing the new estimates for employee density. Those should help determine how much housing construction is needed to balance or exceed office construction.


Judith Wasserman
Registered user
Leland Manor/Garland Drive
on Apr 15, 2021 at 10:52 am
Judith Wasserman, Leland Manor/Garland Drive
Registered user
on Apr 15, 2021 at 10:52 am

I would like to see a distinction between spec houses and houses built by the owners/residents. Some people rebuild their own houses and create no difference in load on city services. $64,504 is a huge fee to start with, and that doesn't cover utilities, either.


Annette
Registered user
College Terrace
on Apr 15, 2021 at 11:04 am
Annette, College Terrace
Registered user
on Apr 15, 2021 at 11:04 am

Good move, City Council.

As for the concern that this is a big change, that would not be the case if there hadn't been a 20 year hiatus in fee review and adjustment. Not doing that is just one of the ways that past CC majorities were developer-friendly.


commonsense
Registered user
Professorville
on Apr 15, 2021 at 11:17 am
commonsense, Professorville
Registered user
on Apr 15, 2021 at 11:17 am

If housing is needed this will not encourage multifamily developers. This is a huge fee in relation to overall cost/unit. If projects are built, this cost one way or the other will be passed on to the tenant.


Name hidden
Downtown North

Registered user
on Apr 15, 2021 at 11:20 am
Name hidden, Downtown North

Registered user
on Apr 15, 2021 at 11:20 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?


RPopp
Registered user
Monroe Park
on Apr 15, 2021 at 11:21 am
RPopp, Monroe Park
Registered user
on Apr 15, 2021 at 11:21 am

"someone building a single-family home would have to pay $64,504 in impact fees for the three categories, up from the current level of $16,883. For a small unit in a multifamily residence, the total cost goes up from $5,557 to $47,707"

That's an additional $1,000,000 for a 25 unit project. Outrageous.

And this was the moment every person considering building multifamily housing in Palo Alto decided to go somewhere else... Queue the RHNA penalties and state regulation take-over.


Online Name
Registered user
Embarcadero Oaks/Leland
on Apr 15, 2021 at 12:05 pm
Online Name, Embarcadero Oaks/Leland
Registered user
on Apr 15, 2021 at 12:05 pm

I'm glad that this CC is finally addressing the inaction of the past developer-supporting city council majorities but I don't understand why "community centers" are getting so much more much money than libraries. Serious question: besides Cubberly and the "community center" part of the Mitchell Park "library" complex, what other "community centers" do we have?

"While park fees represent by far the largest change, impact fees for libraries and community centers are also going up. Today, a single-family home pays $3,321 in community center fees and $1,126 in library fees. These would go up to $4,438 and $2,645, respectively, under the new schedule."


Local Resident
Registered user
Community Center
on Apr 15, 2021 at 2:20 pm
Local Resident, Community Center
Registered user
on Apr 15, 2021 at 2:20 pm

Is the City also charging the impact fees when replacing an old house with a new house on the same lot or just adding a new house where one did not exist before?


Allen Akin
Registered user
Professorville
on Apr 15, 2021 at 2:40 pm
Allen Akin, Professorville
Registered user
on Apr 15, 2021 at 2:40 pm

@RPopp: Did you take a look at the Staff Report? The proposed library and community-center fees are roughly the same as those already in effect in Morgan Hill, and only somewhat higher than those in Fremont.

If there's a similar comparison for park fees, I missed it. However, the Terner Center says Fremont's park impact fees are about $20K for multifamily units, and about $30K for single-family homes.

Zillow says the median home price in Fremont is about $1.2M, and in Palo Alto is about $3.1M. So the proposed new fees are quite comparable to those in other cities, as a percentage of home price.

I think that's pretty reasonable, given that so much of the cost for all these things is driven by the price of land.


Resident
Registered user
Another Palo Alto neighborhood
on Apr 15, 2021 at 3:40 pm
Resident, Another Palo Alto neighborhood
Registered user
on Apr 15, 2021 at 3:40 pm
Consider Your Options.
Registered user
Another Palo Alto neighborhood
on Apr 15, 2021 at 10:53 pm
Consider Your Options. , Another Palo Alto neighborhood
Registered user
on Apr 15, 2021 at 10:53 pm

What other community centers do we have? Lucie Stern Community Center, the Junior Museum and Zoo and the Palo Alto Art Center...for starters. Though not all called community centers, They provide community services as a community center would. All of our liberaries were updated with community meeting spaces in the last round of upgrades. I view this as community service, not library service. The city has used the buildings it has to provide community services in various parts of the city--well-connected to neighborhoods. That's smart.


Free truth
Registered user
College Terrace
on Apr 16, 2021 at 6:58 am
Free truth , College Terrace
Registered user
on Apr 16, 2021 at 6:58 am

I read the comments and most of them seem to be from wealthy and well settled folks in Palo Alto. Good luck if you are in the group of people that are still building your financial future. One more option is being taken away: of extensive renovation/rebuild of very old homes in our PA neighborhoods so those who cannot afford the market priced homes can actually take something old and small and remake it. The council obviously cares little for the fact that most developers are just going to pass this fee along as part of the cost of new units on the market. Then to compensate for the fact that people are further priced out, we institute failed rent control.... The city council seems to only know the playbook of the 70s that has been disastrous for most US cities - and instead of promoting diversity it actually ensured the established wealth to thrive on a parallel world and the others to live in expensive slums.


Dick D.
Registered user
Crescent Park
on Apr 19, 2021 at 4:39 pm
Dick D., Crescent Park
Registered user
on Apr 19, 2021 at 4:39 pm

I agree with those that appreciate the CC move on the impact fees needing to go up. To say they'll frighten away builders of new home because it's SO much should reconsider what the real impact is on town's services . . . and the new, one time fees don't cover the impacts when viewed over just a few years. The cost of additional pupils alone is hardly covered by these one time fees.

Given the very high prices on new homes in Palo Alto, no matter how big they appear, the fees are a "drop in the bucket". Given the extraordinary demand for homes seeing multiple offers at sky high prices are no going to be put off with thr price being jacked up by several percentage points.

The same reasoning should also apply to the ever increasing office space - do builders or the developers "pay their fair share" - no way! WHY?


palo altan
Registered user
Midtown
on Apr 23, 2021 at 10:31 am
palo altan, Midtown
Registered user
on Apr 23, 2021 at 10:31 am

Wow, that's quite a steep and sudden jump in development fees. Could they not have stepped it every year or so?

From a multi-family perspective, maybe that would have even served as incentive for developers to build housing more quickly.

And for single family, I guess we'll start to see a lot of new homes now being called "major remodels".

Yikes. Not good for construction.


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