Planning Commission - Regular Meeting

Thank you.

to the August 20th, 2026 Planning Commission hearing. I'll call the hearing to order at 1 p.m. Ms. Carman, can we please have a roll call?

Thank you, Chair Boss. I'll begin with Chair Boss. Present. Vice Chair DiLuccio?

Here.

Commissioner Barnwell?

Here.

Commissioner Bauke?

Here.

Commissioner Peterson is not here. Commissioner Wardlow? Here. And Commissioner Wiscombe? Here. We have a quorum. Thank you.

Thank you. We'll get started with preliminary matters. The first topic on our agenda today is the request for continuances, withdrawals, postponements, or ex-agenda items. Ms. Arciniega, do we have any? Thank you, Chair Voss. We do not. Okay. And any announcements or appeals?

We do not.

Okay.

That takes us to item C, comments from members of the public pertaining to items that are not on today's agenda. Ms. Carman, do we have anyone in person or remote who would like to give public comment on items not on today's agenda?

Thank you, Chair Abbas. At this time, I don't have any speaker slips for in-person public comment. If anyone would like to speak, you can approach the podium at this time. And I would also just like to remind the audience that if you want to speak under a specific item, you can fill out a speaker slip on the clipboard at the back of the room, and then bring it up to me, and I'll call your name under that item. But since nobody's approaching the podium, I'll move to virtual participation. If anyone online would like to speak under general, you can raise your hand at this time. but I'm not seeing any raised hands, so I will just acknowledge that we received written correspondence from Zach Abood, Bob Ludwick, and Cass Sandsburg, and give it back to you.

All right, thank you. We will move to our new item, inclusionary housing ordinance amendments. The purpose of this hearing is to review and provide recommendations on the proposed amendments. And this project implements housing element program HE13 to update the inclusionary housing requirements for ownership and rental residential development. So we have staff here to provide a presentation. Ms. Falk, the floor is yours.

Thank you. Good afternoon, Planning Commission. Dana Falk, Long Range Project Planner, here to talk about inclusionary housing ordinance amendments this time. Uh, as chair boss mentioned, uh, the recommendation before you today is that planning commission consider and forward a recommendation to amend the municipal code to incorporate these amendments based on the guidance and recommendations from the study. I will not read through all of these for you today, but many, many sections are going to get touched. To determine that the ordinances do not require further sequel review and that the ordinance amendments are consistent with the general plan and the city charter. kick us off. I'm going to go over some background. This is Housing Element Program 13. It's kind of a two-step program to implement here. We did the feasibility, which was step one earlier this spring. That study was published in April and before you on April 16th for your review and guidance on what the ordinance amendment should include based on the study recommendations. We then went to City Council on May 5th and presented the same thing to them to ask for their guidance as well. Since May, staff has been hard at work doing ordinance amendments and have those before you today for your review and recommendation. In a single slide, these are all the recommendations from the study. Generally, we received support from both the Planning Commission and City Council on all of these recommendations, some with revision, and a few of them had differing guidance. Those are identified here in blue, so C, D, and E. as well as G1 and G2, and those are the ones I'm gonna go over in a little bit more detail. So the first clustering of these recommendations that we received differing guidance from Planning Commission and City Council have to do with the fractional fee rates. So recommendation C was for the rental projects of 10 or more units, the larger projects. Recommendation D had to do with the ownership projects, again, larger ones of 10 or more units. And then recommendation E was for small projects fewer than 10 units of both rental and ownership tenure. The study recommended a $50 a square foot fee for those larger projects, rental and ownership. and then a $35 square foot fee for those smaller, less than nine units, or less than 10 units, sorry, nine or below. When we came to Planning Commission, your unanimous support was for the highest in lieu fee rates that we could charge based on the residential nexus study across the board. Those are listed here, I'm not gonna read them all out. When we took this to Council, we gave them your guidance, as well as presented what the study said to them, and Council, majority of Council supported the 50 and $35 square foot fee rates study had supported. And then the second kind of clustering of recommendations that we received different guidance had to do with the options presented to change how in lieu fee rates could be paid to satisfy the inclusionary hazard requirements. I will note these were options in the study, not recommendations, because they diverge from previous policy direction that we'd been working under up until this point for inclusionary. So option G1 was just a slight change to that policy direction, just allowing fractional units of any number, so 0.5 through 0.9, for those larger projects to be able to pay an NLU fee rather than have to round up the amount of units that they would have to build on site. You did not give us any direction on that one, but we assumed your support because of the NANA support for the option G2, whereas council was supportive of this G1 option to allow all fractions to be paid with a fee payment versus on-site units. For option G2, this is the larger divergence from previous policy direction about inclusionary housing units, and it was an option to allow all inclusionary housing requirements to be satisfied with a fee payment. Colloquially, we've been calling it a fee out. This is what Planning Commission supported. You stated it was because of the flexibility it allows an applicant to determine if they would like to provide on-site units or instead to pay a fee. It gives them the full flexibility. However they want to satisfy this, they have the option to do it. It is pretty different out there from a lot of other jurisdictions, as well as, again, completely different than how we had been handling inclusionary previously. So staff was a little bit more wary of this one, I will say, when we brought this forward to you in April. When we took it to council in May, they wanted more outreach and more research into this option. which we did. We were able to host two virtual focus groups in June. We spoke to 16 different participants, and they had a variety of perspectives based on their experience with residential development in town. Across the board, they were generally supportive of allowing this fee out option, this G2, to pay rather than build. But there was no consensus on what the fee rate should be for this. We heard, much like Planning Commission support, the affordable housing advocates, did support that maximum fee rate, that 72 and that 91. That was on the previous slide, whereas the for-profit developers that we were able to speak with, they favored a lower fee rate. We were also able to do some additional analysis of these fee options with the same consultant that had done the study for us. They took into account all of the Council's supported recommendations to see what would the cumulative feasibility be for two prototypes from the study. So I'm going to focus my narration on the center column, which is prototype That's a 43-unit rental project. When we accounted for all the recommendations and allowing all fractional units via payment, the feasibility of this prototype increased pretty significantly. And it also increased the options this project had available to them because they could pay the fee versus build the units. And when we looked at the option G2 to fee out, build no on-site units at all, pay the fee, we used the fee rate that Planning Commission supported, the 91 in this instance, since it's a rental. And the feasibility did decrease in this instance because that maximum fee rate that we could charge for the residential nexus study was not based on the cost to construct in any capacity. So it cost more for a project to pay for those units under that fee rate than it would be for them to build it, which is why we have a negative feasibility here. but it does increase the options available to that applicant. So in a world of just numbers, not taking into account any of the nuance or other implications of development, a rational actor would, we think, build those onsite units rather than fee out by paying that fee just because of the impact to the overall development of it, to the whole project. And you can see all of the numbers behind this very short summary slide in, I think it's Appendix F, if I'm remembering correctly, or E, I'm sorry, it's Appendix E, Exhibit E, I'll get it right eventually, in your staff report. Okay, with that I'm going to do a little sidebar into some of the math behind this because we've been getting a lot of questions about how it all works. I just want to do a quick explanation of how these numbers play together to generate the different requirements and the different fees that would be charged to a project. So the first calculation here I'm gonna talk us through is the total inclusionary housing requirement, and this is based on how many units a project is proposing under base density, as well as what's the required percentage. So for rental, that's 10%, and for a ownership project, that's 15%. Then based on that number and how many units they're building on site, you can determine the fractional in lieu fee amount. And this is the fractional remainder divided by the total amount of inclusion area that's required, multiplied by the fee rate, multiplied by the livable floor area of the whole project. I will note the livable floor areas where we've been getting a lot of questions from people and what floor area are we intending this calculation to be based on. In light of that, we have a suggested motion for Planning Commission today to direct staff to clarify the floor area used in these fee calculations to hopefully resolve this. We thought we had, but apparently we didn't. So we're just asking to continue momentum that you include this motion direction for us. I'm gonna go over what this means using that same prototype I just walked through for the feeing out and the fractional fees. So again, prototype five is a 43-unit rental project. So total residential units, 43, times the required percentage, 10%, that's 4.3. Then to determine the fractional in lieu fee payment, assuming this project is building four units, so that's .3, because 4.3 minus four is .3. You divide that by that total requirement, the 4.3, multiply it by the fee rate, which this is the council-supported value of $50, and then the floor area of all those residential units combined, just over $34,000, and you get a fee rate of $121,650. Can I ask you to pause?

Yes. Because this is a very helpful slide, and I think we all want to just read it. Yes. I'll look to others to nod when we're ready. What did you say? Just a moment to pause just to make sure that we've read it.

Yeah. I realize this is embedded in the study and it's all there, but maybe it could be a little clearer. So I was like, I'm going to call it out for us and everybody who's interested in watching. So this is how we calculated the in lieu fee rate. This is the number that was in the study when we talked about these and the feasibility analysis that I just showed you on that other side with the table uses this number in the pro forma in the packet you have before you today. Thank you for letting me interrupt you. No problem. I just wanted to make sure that I saw notes taken and photos taken. And I can come back to this slide at any time as we're talking. Thank you. Appreciate it. I also want to show you one other calculation because I feel like this is going to be important. So this is option G2 to fee out. This is what Planning Commission supported based on City Council's direction for outreach and research and the results from both of that. We are supporting including this in the amendment as an option for compliance that a project can decide to use. It is a very, very similar formula to the one you just saw. But it's the unbuilt inclusionary housing requirement divided by the total requirement times the fee rate for this, which is different. It's the one you guys supported. And then times that same livable floor area. So in this instance, the assumption is the project is building no units. It's prototype five. Rather than building four and having a 0.3 remainder, they're saying, I build none. So they pay 4.3. because that's the unbuilt. You divide that by the 4.3, multiply it by the fee rate, that is the maximum we could charge times the total residential of the structure, and then you get a pretty big in lieu fee number here. Do I need to pause?

Next slide. No, I think you'll have questions later. Oh, I will. Don't worry, I'm ready.

Thank you. Okay, so with that, that's all of our background, that's all of our math sidebar. I'm going to walk us through what the proposed amendments are in front of you today. It is a package of amendments. We're looking at touching 25 sections in the municipal code and also amending the fee schedule as well as the affordable housing policies and procedures. I will note these last two aren't in your request for recommendation today because these are adopted and amended by city council resolution, not ordinance, but they are intrinsic to understand how all of those study recommendations are being implemented. We're just not asking for your recommendation on those two items. as part of this effort. Now the reason why we're touching so many different parts and different pieces is not only to implement the study recommendations but because of the secondary impacts from implementing all these study recommendations. We are taking this opportunity to kind of relocate all the definitions into a single place rather than within each chapter, as well as revise and remove some that are no longer necessary. We're updating municipal code references due to the kind of reshuffling that I just mentioned. And then there are a few sections we no longer need, again, because of the reshuffling, to implement all of the study recommendations. I'm going to focus my presentation today on Chapter 3160, Inclusionary Housing. This is where we're consolidating the inclusionary housing requirements, which currently today exist in three different chapters into a single chapter, which really is implementing recommendation A to apply the inclusionary housing requirements to all rental of five or more. This does that. I'm going to go through just a few of these sections where we are implementing the recommendations, but I can answer any questions that you have about any of them. So the first section I'm going to talk us through is Section 30-160-030. This is implementing three of the recommendations from the study. The first, B, is to maintain the inclusionary housing requirement, and that's shown in the first two bullets here. So you can see rental and ownership, same required percentage, same project size where it starts to be implemented, and then same household income levels are being targeted. F has to do with the inclusionary rental units being allowed kind of above density or not counting against density so that it aligns how ownership is done and that is the last bullet here. So we're allowing those units without detracting how many market rate units a project can do now for both ownership and rental. And then G1, that's the no rounding up for the fraction remainders for onsite and that's the second to last. bullet here on this screen. We're not requiring that rounding up of 0.5. The second section I'm going to go through is about the in lieu fees. This is 30.160.050. You should be familiar with CD&E. These are the fractional in lieu fee rates. And that is kind of the second bullet here. I realize I probably should have put these in order of bullets and not alpha numerical there. But the fee rates are going to be included into the fee schedule. And that's clearly denoted in the ordinance to go look there. And then recommendation H was to simplify how the ownership in lieu fees were calculated. And we're aligning that with the way the rental is calculated. That's the first bullet here. I do want to note, not a recommendation from the study, but something that was stated as a preference by both planning commission and city council was to collect those in lieu fees and the local housing trust fund. And we were able to do that. So now all in lieu fees collected will go straight to the local housing trust fund. Alternative compliance section 3160-060, majority of this work in this section had to do with aligning discrepancies between the ownership program and the rental program. It's also implementing that option G2 to fee out, which, like I mentioned, you were fully supportive of, and council asked for more research and outreach, and from that research and outreach, staff has decided to offer it in the proposed amendments as an option for compliance that an applicant can just elect to use. AND THAT OFFSET FEE REQUIREMENT WE WENT THROUGH A LITTLE BIT EARLIER, SO I'M NOT GOING TO TALK ABOUT IT ANYMORE. WITH THAT, I'M GOING TO MOVE OVER TO THE FEE SCHEDULE. THIS IS IMPLEMENTING QUITE A FEW OF THE RECOMMENDATIONS. IT ALSO IS KIND OF BEST PRACTICE AS WELL THAT THESE FEE RATES ARE NOW GOING TO BE AS PART OF THE ANNUALLY REVIEWED FEE SCHEDULE THAT IS ADOPTED BY COUNCIL EVERY YEAR WITH THE ANNUAL BUDGET. SO EVERY YEAR THESE WILL GET EVALUATED, ADJUSTED. from I, which is to adjust based on like an annual construction cost. We are using the California construction cost index, which, um, you all had recommend. We look at alternative cost indices to look at and council supported using the CCCI. So this is not before you today is like a recommendation item. Um, but we wanted to let you know that this is where we're going with this and the foundation of why we supported this. It will be amended by council via resolution to the fee schedule that was adopted not too long ago. And then the last recommendation, as well as the last document we're touching, is the affordable housing policies and procedures. So recommendation J suggested to amend the target area median income used in calculating rent. And so it's a single cell that needs to be updated in the AHPP that has that value. It's the only location for it. And then since we're going to be touching this, we're also going to include example calculations for how to do all of this math that I showed you on the slides. as part of this just to give additional context for people who maybe want to understand it a little bit cleaner with examples so that way it's comprehensible a little bit easier. And again, this is also a council resolution to amend. With that, next steps. So we are here before you today asking for a recommendation. From here, we are scheduled to go to ordinance committee and then on to city council. We are tentatively scheduled to get this done by the end of the year, which we're all excited about. And as a reminder, and I close out, the recommendation before you today is to consider and forward amendments to the municipal code to incorporate all of these study recommendations and the guidance you and council provided to us that those amendments do not require further CEQA review and that they are consistent with the general plan and city charter. Oh, and don't forget the suggested motion because I almost did. With that, thank you.

Thank you. That was the most rapid presentation ever. So when we get to the questions, I think we're going to ask you to repeat a few things while we absorb it. But thank you. A lot of information to unpack there. So for now, that takes us to comments from members of the public pertaining to this specific item. Ms. Carman, I think we have a couple folks in person or remote who would like to give public comment.

Thank you, Chair Boss. At this time, I don't have any speaker slips for in-person public comment, so I'd like to invite the audience to approach the podium. You can come up.

I think I'll fill this out for you. Hi, I'm Craig Minus. I'm a land use planner and executive director for the Coast Housing Coalition. I wasn't going to talk. I wasn't planning on it, but I just wanted to get a few things off my shoulder. I appreciate this work, and I understand you guys are heading down some directions, but I want to remind you that I think, if I recall correctly, the basis of this is based off a BAE study that said inclusionary makes a lot of projects infeasible. So I'm slightly concerned that you're down a rabbit hole talking about fee amounts and how to handle this stuff when the basis of this conversation ALREADY TOLD YOU THAT INCLUSIONARY IS A REAL BIG PROBLEM FOR HOUSING PROJECTS. SO I THINK THAT'S REALLY IMPORTANT TO REMEMBER. SECOND THING I WANTED TO KIND OF GET OFF MY SHOULDERS IS IF WE'RE JUST ADJUSTING THE AMI NUMBER LIKE RANDOMLY, LIKE WHY 110? MY ORGANIZATION ADVOCATES FOR HOUSING AVAILABLE TO THOSE MAKING 120 TO 200% OF AMI. THAT'S A MISSING MEDAL. WE THINK THAT'S NEEDED. Why don't we include that group? So I don't know if there's a methodology with that, but as we're now talking about this, I think it's a good opportunity to ask those questions, and I'd encourage us to look at providing housing policy that makes housing available to the missing middle. Thank you. Thank you.

Thank you. If anyone else would like to speak, you can approach the podium at this time. and just state your name for the record.

Good afternoon. Peter Lewis. I think I'm right in this. I've built the majority of inclusionary housing, which is eight. Eight out of 13. This is such a failure. astonishes me that you guys are doing what you're doing. And you have to get real. If you want housing, private developers cannot subsidize housing. Affordable housing projects can be done with government money and government taxes. There's no other way to do it. So we built 300 units, roughly, and then you adopted inclusionary housing. You built 100 cents. Now, this is removing state bonus density. So you've stepped back radically. You were producing a couple hundred units a year under the original AUD, and you're now producing basically none. If you take my project, Sultara, out of the picture, which is roughly 120 units per acre, double the current code, you have five units. And are we really wanting housing, or are we trying to create a headline that you're doing something for affordable housing when you're not? The data should drive your decisions. And unfortunately, what happens is when you require inclusionary, people aren't building it. Thankfully, you supported that for adaptive reuse, not to do inclusionary. It's going to make a difference. And I applaud you for that. recognition and that analysis. Thank you.

Thank you.

Thank you, Council, for meeting with us. My name is Lisa Sands and I'm on this committee with my input. I'm just a regular citizen here. But I'd like to your previous statement from this developer, and I understand what you're trying to do, but I agree with the gentleman's statement, is we have to go to other sources to really accomplish housing. We just can't do it the way we've been doing it, and we are under enormous pressure on our daily life. No one is housed correctly. I mean, maybe if you're ultra wealthy, but regular people cannot live. They can't even find a place. And the massive inequity that's going on in our society, and it's accelerated by this corrupt administration, is something to look at. So we can't do things like we used to do, and just developers handling it with fees, et cetera. We have to utilize it other ways. And I strongly suggest going to our government entities, state, local, to build housing that is truly, that we're affordable, we sling around, but people don't know what they're saying. is where people can actually get in and live. We have a situation in Yardi that it's just gotten Paseo Nuevo for nothing. And I've been very involved with this project for two and a half years watching it. And this affordable thing of allowance of developing part housing and then part development is another example of deals being made under the table so that inequity can farther fall apart. Studios start at that Nordstrom's building, I saw the plans, they start at 4,500 for a studio. So I want to enlighten this is we need to really push other entities to get housing done In an orderly way, we can't develop every corner of our community. We can't. There's no room left. So we have to be smart, and we can't just charge fees. We have to really look at other entities and pull them together and start working on it. I really appreciate you listening, and I appreciate your work. Thank you.

Thank you.

With that, I will move to virtual participation. If anyone online would like to speak, you can raise your hand at this time. But I'm not seeing any raised hands, and we didn't receive any written correspondence for this item, so I'll give it back to you.

Thank you. I'll now open it up for commissioner questions, and then after we'll move to comments. No one has any more questions.

I'll begin with Commissioner Wardlow. Thank you. And thank you, staff. I'm going to start just with G2, and I think I'm going to have more questions. I really appreciate that presentation and for taking the time to meet with us. I think there's been, you know, I think all of us have had a lot of questions about this process, and I appreciate the additional work that you've done on it. So I want to focus on G2 first, and then I'll let my colleagues speak, and then maybe I'll come back, depending on how the conversation goes. So I know that this commission had recommended the highest legally defensible piece. My understanding is that staff is now supporting that recommendation. In reviewing all of the further research that you've done and having a lot of conversations about when we're discussing the Better Buildings Program, and the move to really incentivize housing downtown and that that program does not elaborate on what we're gonna do with the inclusionary. I wanna understand that when we're looking at this fee out, are we actually trying to provide a pathway for developers to fee out and so that they actually build the building or is the goal to set the fee so high that they can't fee out and that they are forced into building the building anyways, like building the inclusionary units? Because my understanding of what you said earlier, and it was very fast, but I'm pretty sure you said that the cost at 91 is more expensive for them to fee out than to build the unit. And so I don't see how that would make sense for people to do.

Commissioner Wardlow, the fee was set based on what the need was. that we could, that would be generated by those, that market rate development. So that was part of the study. The residential nexus study was an appendix to that study in April. And that's where we got that $91 per square foot change. Staff, based on comments that we heard not only from Planning Commission and your support, but also some of the comments that were made by City Council that I can't recall exactly right now, that there was an interest in allowing this option, but not making it easier than building units, because the priority stated by both Planning Commission and City Council was on-site unit creation is the goal. We want to create units, we want to create units, we want to create those units. And so when we were looking at the fee study, we're saying this is the demand that's being generated, this is how much we could charge to create those affordable units if they're not being created within the project itself. If you would like to give us guidance or recommend a different fee rate, I don't think staff would be adverse to considering something, but we did go based on what we heard from the Planning Commission hearing as well as the City Council hearing on creating flexibility for an applicant, but still prioritizing those on-site unit creations. So yes, while the the feeing out option presented at the $91 square foot rate in the analysis presented in the Exhibit E, it is less feasible than if a developer elected to build those units. And that didn't seem like a downside because for prioritizing the creation of units, shouldn't it be harder to not build units than to build units all within the capacity of what we could maximum? The highest maximum rate we could charge. There we go. I got the words in the right order. Does that answer your question?

And I'd like to just add something real quick, too. The fee-out option, of course, gets them out of the 90-year relationship with the city on having a deed-restricted unit. So that might be more attractive even though the cost is high. It's hard to know.

Okay. And I just wanted to make sure I was understanding that correctly. I don't think that we, or I'll speak for myself, I don't think that I understood that in the previous hearing, that what was being proposed. And I think, you know, I really appreciate you doing the work to put the calculation up with all the words so that we all understand exactly what and how this is being calculated. But I think, you know, we're, as represented in the hearing on Monday, I think we're all really focused on building housing. We want affordability. I am concerned that if we do not get buildings in general, that we don't get that inclusionary piece anyways, right? Zero out of zero is zero. And so I'm trying to think creatively of how we reach our goals of affordability, since that's clearly the direction. if we're trying to create the flexibility around a fee out, but that fee out is less economically viable, I don't know that we're actually creating that flexibility. So that was my question, and I'll let other colleagues speak, and I'll come back to this, but I just wanted to understand that piece.

I'm going to expand real quick on my answer as well. As part of the study, we did do an analysis of many different ways to set a fee rate. It's table 7 and 8 on page 41 of the study. If you want to go look at it, it shows you the spectrum. based on a couple different ways that you could analyze setting a fee rate, what you could set it at. And one of the fee rates is equivalent to the cost of building those units on site, just for your edification. It is all there.

I appreciate that. I'll let some of my colleagues ask their questions, and then I'll come back. Okay. Commissioner Peterson.

Thank you. In the example that you used and the calculation that you put up, I'm curious, why do we include the entire project in the square footage calculation rather than just the square footage of, like, an example 4.3 units? Doesn't it make sense to charge an in-lieu fee in lieu of the units in terms of the area that we're calculating what they should pay out?

Excellent question. I've got a whole spreadsheet and many pages of looking at different ways calculate the in lieu fee. Let me really quick find what slide number that is to pull it back up. So is it, nope, nope. This one that you're looking at that you're most interested in?

No, I think it was the total one.

Okay.

This one. The livable floor area.

Okay. So livable floor is used in all the fee calculations.

Sorry. Sorry. No, the $3 million one. I apologize. Sorry. I thought that was this one. I'll get there eventually. Sorry, guys.

That one.

Okay. Yes. So the livable floor area is used in all the calculations for fee area, and the reason we use it in our calculations is because we're also using a fraction based of the fractional or unbuilt, depending on the situation, divided by the total. I will say we looked at other jurisdictions and how they calculate their fees as part of the study effort to see could we, should we, change what we're doing here as we're looking forward. But when you do this math and don't use the full unit or full residential square footage of the entire project and you just use the average unit size, which I think is maybe what you're considering, it's a 10% of this amount. So when you do the math on it, you're getting a lot lower collected in LUFEs and it just doesn't, equal the cost of constructing that affordable unit that this fee would be supporting. So I hear what you're saying, and we did analyze different methods that we could utilize to calculate these fee rates. We looked at different jurisdictions because, unsurprisingly, every jurisdiction does it a little bit differently. And this is the calculation method that we've had in place for almost 10 years now. And so we decided, let's not change it. Let's try to make it a little bit clearer in terms of the floor area you use here, but intrinsically keeping the logic behind it the same. It is not based on just this average unit size, because the math is piddly if you want to go through my can. But it was evaluated by staff, and we didn't change it for a reason.

Okay. I'm sure we'll talk more about that later. I think the only other question I have, and maybe I should have asked this one first, is if one of the goals, which certainly it should be, is to provide flexibility and incentives for developers to choose our program rather than State Density Bonus, how are we thinking about this in light of the potential building back, I'm sorry, building better housing initiative and creating an alternative pathway to that. How are we in conversation about these two things? To make it feasible, as it was mentioned earlier in public comment.

Commissioner Peterson, that's a completely separate program, so I would urge the Planning Commission to look at this inclusionary program simply on its own. This program is not about any type of relationship with state density bonus law. This is just about the city having some method to obtain moderate income housing units. At some point, we will also be creating a local density bonus program, and that's where those things will also be addressed. But yes, also in the Better Buildings program, because that is an incentive program that we wanna work on. But this is essentially the baseline that applies citywide and it's how we would get moderate units.

My thinking and my question is, isn't it important to think about how we're structuring this in light of these requirements being potentially in that and these things being in conversation with each other. We're potentially mending this, we're mending that. we're all in the kitchen here together, isn't it important to think about that?

I think it's important to consider them because for example, if the inclusionary program becomes so easy and flexible, then there's no other incentive we can give with the better buildings program. You've already given it with this ordinance. So that's why I think of this as kind of the baseline for what's required. And I think as you know, developers could absolutely essentially waive this requirement if they do affordable units through state density bonus law that's equivalent to the 10%, then we don't get these moderate units. So this is only for projects that, you know, it's for those projects that are not using state density bonus.

Thank you.

Commissioner Barnwell.

Thank you, Madam Chair. I really appreciate the numbers that you gave us that show a little bit of what we're looking at. I remember when we first discussed, not when we first, but the last discussion we had. And I carried the flag of the Planning Commission to the City Council's discussion. And I have to say in all candor, I don't think they knew what was going on. I don't think they understood the nuances of it. And that isn't to their lack of ability to understand. But I don't think the presentation to them, nor this presentation right here to us when I'm finally starting to see it, gives us the full picture. For example, the council responded to the audience comments that, well, we need housing, we need it to be built. And unless we include these units in the project, in other words, the inclusionary unit is actually built in the project, unless we do that, it won't get built, or something like that. And that ended up being kind of a mantra that was said again and again. I haven't heard the staff come up with a refutation of that, which in my mind goes something to the effect of, in Luffy's, go to the housing authority. And the housing authority has, depending on who you talk to, a multiplier of four to 10. So if we give the housing authority a million dollars, they can get $4 million. That portion of this discussion was never brought out when we're talking about what is the other side of the equation. Also, I see a comment come here from staff. Another one is, As a general contractor, I haven't seen anybody tell me what are the numbers that the contractor is going to go through. He's, she's going to say, well, what is it going to cost me to build, let's just say, a 10-unit project, and I have a one-unit requirement. What does it cost me to build that one unit versus what are the inclusionary fees? We don't show those numbers here. which would give us a real good understanding of how the developer would decide, do I want to build or do I want to pay an in lieu fee? And then in the paying of the in lieu fee, do I want to pay the 25, 35, 50, or $91 number? We don't have any of those facts in front of us. And I think that's a huge gaping hole in our ability to say yes or no to any of these proposals. At least it is for me. I don't have all the numbers. An additional component that's missing is I know that the developers are thinking, I don't want government's fingers in my project. So when they're required to build it as a unit in the project, none of that is in any of these numbers right here. But they go into the thought process of the developer. And I'm troubled by that. Not having enough information here, having listened to the discussion at the city council where clearly, quite clearly, their decisions were being made on comments by the audience. This is a tricky topic. I mean, I do this for a living. I'm a real estate appraiser. This is what I do for a living. We're not there yet as far as everybody, even on this board. You heard the chair a moment ago say, could we pause and look at these numbers a second? Why don't we have those numbers? That's my question to you. Where are those numbers that I'm talking about? Why don't we have those?

They're in Table 7 and 8 of the study.

I beg your pardon?

Table 7 and 8 of the study had the cost of building a unit versus the cost of providing a unit versus what the maximum fee rate could be.

Yes.

We did have those available.

You understand that this is a public presentation on television to the city of Santa Barbara. They're not seeing those numbers. And we're making decisions on the basis of number that no one is presenting to the city. And so the city is wondering, well, how is the planning commission making this decision? How are we doing that based on numbers that are hidden into a document that aren't presented either to us or to anyone else? I just don't think. The numbers are insufficient. I'm sorry, Madam Chair.

I'm just going to interrupt real quick because I want to make sure that we're on questions right now. Well, my question is, where are these numbers?

That would be my question.

OK. Where are the numbers? The tables were publicly posted as part of the meeting materials. They were.

Well, again, they're not here.

I do not have a slide for them. You are correct. But we did provide the information. It just, in light of only having a 20-minute presentation, I could talk for hours about this if you'd like me to. But at some point, we do have to decide what is the highlights And what is the supplemental information that was provided in supplemental?

Well, let's continue to talk about the highlights. Why isn't there a discussion about the multiplier effect of the housing authority and the in lieu fee going to that and that consequence of the in lieu fee concept? And why aren't we talking about the idea that the developers don't want government's hand in their project? And why aren't we talking about the value of the piece of real estate when it's all said and done, if it has an inclusionary unit in it, it's not 10 units, it's nine units plus an income stream. That's some strange thing that the owner is trying to offer on the open market for sale, and the collection of those rents is also controlled by a government system. Why isn't that discussion in here?

I think that was the discussion that we were having previously, but today we're asked to consider the amendments.

I never heard that discussion.

When this item was brought before the ordinance was revised, that would have been the time for any further discussion. Today we're considering ordinance amendments.

But I beg to differ. I'm here to make a comment on the staff presentation. By the way, don't misunderstand me. The work you guys did is fabulous. But I don't think we have... If this was presented to us the last time, in the way that I'm discussing it, the in lieu fee going to the Housing Authority with four to 10 multiplier effect, the developers not wanting government in their hand and 10 unit being turned into a nine unit. I don't remember any of that as part of the discussion of why or why not a developer would say yes to this. Those numbers are not here.

Commissioner Barnwell, I will address the multiplier effect. One of the reasons why still providing the unit is valuable. And there was conversation about, well, I do want to back up. Money from the local housing trust fund can go to various nonprofit organizations for affordable housing. So I know maybe we're using housing authority as shorthand, but I just wanted to be clear about that. And yes, there are multiplier effects when they develop housing. However, they have a very difficult time providing moderate income housing. They don't necessarily get those multiplier effects if they're developing moderate income housing. Those loans and fee structures are geared towards very low income or low income. So that's why our program is focused on moderate income units and that's why getting the units provided on site is critical because there really isn't another way to get that affordability level if not provided by the private market.

I thank you for that answer and you brought up my next question is in ownership units middle income people are included. Would you please tell me why middle income people aren't included in this discussion having to do with rental? Why isn't the category middle income and why have we limited it to moderate income?

That was studied in the study. Recommendation B was to maintain the current required amounts, the 10% and the 15%, as well as the households that were being targeted by those inclusionary units, so moderate income. for rental and then middle for ownership and upper middle in some instances of ownership. So that was analyzed then and presented on then and the discussion and the guidance that we received from Planning Commission and City Council was in support of maintaining the focus on moderate for rental and middle for ownership. So staff is bringing forward ordinance amendments that do so.

But we hear from a gentleman who spoke here and we are constantly talking about the missing middle. and we're still missing it by being below it. And if we included middle income as part of this project that we're doing right here, we would be hitting that middle, the missing middle, wouldn't we or not? Am I misunderstanding?

Mr. Barnwell, it is certainly an option. The reason, part of the reason why we didn't go there is because in terms of the city's RHNA numbers, we get no credit if we go above the moderate income. So that's a consideration. Also, some of the analysis that we did with our AUD tenure retrospective report, the data showed that those middle income and upper middle income were able to afford the rents that were being offered. As high as the rents are, if you look at what the income levels are for middle and upper middle, the data showed that they were able to afford those units.

Wait a minute. They were able to, what units are they?

To afford market rate units. So that's why we focused on keeping it at moderate and not going up to middle. Part of the reason why we think middle makes more sense for ownership is because of the difficulty with down payments, and it's difficult to have enough money to make the down payment when you're in that moderate or lower income group. So that's why we kept the two programs, ownership and rental, with separate affordability requirements.

Okay, thank you. Madam Chair, I think I'll wait until my comments come around. Thank you. I really appreciate the answer.

Thank you. And I'll go back to Commissioner Peterson.

I have kind of a follow-up on what Commissioner Barnwell said and maybe trying to pull together some things here. I think maybe a good question that comes out of the points that you raised is, Has there been any thinking, have we done anything about what the key number is, the sweet spot number is that would incentivize someone to use our local program, as an in lieu fee, to use our local program rather than state density bonus or not building at all? Has there been any thought about where is that sweet spot in terms of incentivization while also reaping benefits for our local housing trust fund? And if not, maybe we can come back and talk about it at a later time if we don't have that information now.

There's definitely been thought about it, but it's hard to determine what is the sweet spot because it differs for every development and what the carrying capacity, for lack of a better term, it has to to be able to pay an inclusionary housing fee. I'm just thinking if I had my economics only hat on, I would say I can't pay anything. The sweet spot is nothing. We have heard comments in that vein in the past, but then we also have to remember that we are trying to create inclusionary housing as part of this program. And so nothing doesn't do that. So we considered it. We tried to figure out, well, how could we determine what that number is? And we can't is the short answer. We can guess. The table 7 and 8, which I've mentioned a few times, take a stab at what's the construction cost for building a unit. We could set the feeing out fee rate there. That has the most logical answer to it. But that doesn't prioritize the creation of on-site units. because it's the same cost to a developer to build those units as they would to fee out. And if the goal is to create on-site inclusionary units, setting the fee at the same cost to build those units would not incentivize people to build those units because it's a little bit more expensive. And also, it doesn't take into account that 90-year relationship you're having with the government. Commissioner Barnwell has mentioned it, right? What is the cost of that? It's a 90-year term for that unit to maintain affordability at a moderate or a middle income. There is a cost associated with that. Do I know what it is? No, unfortunately. We also can't set that because it is so dependent on what the rents are and how much they could make and a whole bunch of factors that over time change. So there is a sweet spot. We don't know what it is, and we have no way to determine what it is. This is informed as much as we possibly can by the facts, but also by policy and the direction that we've been given by all of you, as well as the other members who sit on this dais. Tuesdays that you know we are trying to create affordable housing we're prioritizing affordable housing that is goal number two of the housing element but we're also trying to create new housing goal number one so we're trying to straddle what is the most fee we could charge what is the highest amount of inclusionary we could require and still get projects to develop because to Commissioner Wardlow's point zero percent of zero is zero and so we are we are stuck between a rock and a hard place on this one we tried to get as much data as we could. We tried to look at this in as many different ways as we could. And at some point, it is a policy decision, which is why we bring it to you.

Thank you. I'm going to go to Vice Chair DiLuccio.

We should take a break after that. OK. So just to clarify a couple of things. For inclusionary housing here, when we're talking about rentals, we're talking about moderate, correct? And when we're talking about ownership, we're talking about middle. And is middle considered? market rate as far as counting toward the arena number?

No, it's not.

Okay.

That's an incorrect number. So when we calculate our arena progress every year, above moderate, meaning 120% and above, just gets counted as above moderate. Middle income for us is 120 to 160%. So 120 to 160 is above 120. the middle income bracket of AMI does count as above moderate in our arena progress. Does that?

So there's an above moderate category in the arena?

It's just 120% plus.

But isn't that, is that market rate?

Not necessarily. The market does what the market does. Sometimes it is. What's the category?

What are the categories in the arena? Is it low and then it's very low and it's moderate and above moderate. Gotcha. So it's counted toward above moderate. So above moderate is really almost market rate housing sometimes. It's not really, we're not providing really affordable housing at that point in a sense.

According to Rena categories, correct.

Okay, thank you. I thought I knew that. Okay, also a couple of other questions. For adaptive reuse, just to clarify something, one of the speakers spoke that was not a, there was an inclusionary housing component that there actually is, right? Isn't it after 49 units?

40, actually, and only in the CBD is it under 40. That is wage.

So it's quite an incentive, but there is an inclusionary housing component after 40. Correct. Which probably the Nordstrom's project would probably qualify for that. Correct. Can we look at... Talk about fractions for a moment. When we're talking about fractions, we're saying now for fractions... you can pay into the housing fund for that instead of providing on-site if it's over 0.5. If you have a 0.1 or 0.2, at that point, any fraction would be paying into the inclusion housing fee.

Correct. So the current program right now at 0.5 requires you to round up. So a 1.5 requirement would have to provide two on-site units, even though they've only got a requirement for technically one and a half. The requirement as it stands under the current program is round up any 0.5. The G1 option is the 0.5 doesn't round up. So if you have all the way up to 1.9, you still are only required to do...

So the entire spectrum from 0.1 to 0.9 would be... All tractions, correct, yeah. And then the other question, I thought this was a silly question, but I'm going to ask it anyway because I got really confused. This conversation is kind of confusing sometimes. But if you use a state bonus density... Can you have to then you provide so many units on-site with that affordable units? Can you pay the in lieu fee instead of building the units on-site? Or you have to build the units in that case on-site?

For state bonus density you have to build the units.

Right, so we're not talking about the in lieu fee for that component.

Correct.

Okay. Can we look at slide 22? Okay, slide 22, I see here The in lieu fee, this is a new one for lot only subdivision of $760,000. Can you explain that to me? You actually wouldn't be paying $760,000, would you? That's a lot of money.

No, so the method here is based on the current calculations for ownership. It's exhibit F in your staff report, explains how we got to this number. And I did create a slide for this one if I can find the right number.

You knew I was going to ask you this question, right?

I did. Okay, so when we look at the lot-only subdivision in lieu fee amount, the calculation method is shown here, and the in lieu fee rate, that's $760,000, is prorated. It is prorated based on how many lots are being created in this project. So if you're creating fewer than 10 lots, you're prorated at 5% of that $760,000 times the total number of lots, whereas if you're creating 10 or more lots, it's 15% prorated of that $760,000. multiplied by the total lots.

So if it's 2 to 9, it's below the 760, but if you have 10 lots, it's probably above the 760.

No, they're still below, 5% and 15%.

Oh, it goes to 15 to 5 to make it below the 760.

Yes, it's always much, much lower than that. It's just the way that value is calculated. It's based on... a whole slew of things having to do with the cost of a two-bedroom condominium unit in the city for the last 12 months, how much it costs for a project to build or rent or sell a low-income unit, I think it's sell a low-income unit, accounting for how big the unit sizes are, a profit for the developer. There's a bunch of variables that go into developing that $760,000. That's why it's a big number and then it's prorated down.

I'll ask one more question. The fee out. The $3 million from the analysis. Was that based on how many units was that based on?

In essence, yes. It's based on how many units that project is proposing, how many units they are not building that are required as inclusionary units, as well as the total size of the building.

If they have to pay $3 million in new fees, how many units is that We'll calculate it on.

4.3. 4.3.

Okay, gotcha. So that was a project with 43 units.

Correct. That example was applying. And if you want, I could, I mean, I don't have any slides.

And then you used, even though council went with a lower number, they would have gone with $50. You were using seven, for ownish rentals, you were using 91, right? I was curious. I mean, if that was, if you used 50, then it probably would have been a million five or something, half that. Approximately.

Approximately half is correct. I would not recommend doing that. Going back to those tables seven and eight that I've mentioned a few times now, when we look at the construction cost of a unit, if we set the fee out fee below that, nobody will build units ever.

I mean, under this scenario, now that we're seeing these numbers for the fee out, would you even recommend it?

I would. If we're saying we want to prioritize the inclusionary units being onsite, I do recommend them.

Do you think developers would go for that?

I haven't heard any developer that says they love inclusionary at all, so probably not. We'd have to ask them.

Well, those are my questions for now. Thank you, and you did a great job on this. I want you to know that. It's very, very thorough.

Thank you, Commissioner Whitcomb. Thank you, Madam Chair. I guess I'm a little bit confused by Mr. Lewis's comments because in all the years I've been on this commission, all I've heard from developers is give us a reason or give us a system that allows us to deposit money and not build the units because we have to we're not in the affordable housing business and we don't want to spend the time doing that. I, am I missing something? Because that's, I think that's been a catalyst to get to this point of, of actually giving developers an option.

You commissioner or wisdom. I'm going to do it right this time. Um, you are absolutely correct. When we were working with the consultant to develop the study that was published in April, they had not included this being out option in any capacity staff, had requested that due to public comments that I heard during the adaptive reuse that I'm imagining are the ones that you're also referring to. We recognize that there needs to be a couple more options to consider how we meet the inclusionary housing requirements. This was one we've heard interest in. We should study it. We should see is this something offered in other jurisdictions? If they offer it, how do they offer it? Do we want to offer it? That's why we brought it forward as an option, because as staff, we were like, this is quite different than the policy direction we've received to date. But because of what we're hearing in the community, we want to make sure we're addressing it, you know, and even considering it. And that's why we brought it forward to consider allowing a fee out option. Obviously, Planning Commission, you liked the idea. City Council was not necessarily adverse to it. They did ask for more outreach and research. And through that outreach and research and the support that we heard from you all, staff is proposing it as an alternative compliance option at those higher fee rates. That aligns, again, with the policy direction to prioritize onsite units. It was not calibrated in any way, shape, or form for the feasibility of a project. It could be, but it was not.

Yeah, and I think when the $91, I know it seemed high to people, a lot of people, but When we've talked about this in the past, we've talked about what it costs to build a unit. And my recollection is it's around $800,000 to build a unit. And this is $738,000 per unit. So it seems like it's reasonable to me if you don't want to have the record keeping of the deed restricted units.

Correct. And that was kind of a rule of thumb gut check that I did as well. I've mentioned it. I have this really fun little spreadsheet of how the numbers play out in different ways. And also having heard from Housing Authority about the cost for them to develop an affordable unit, that's always something we're keeping in the back of our mind to kind of gut check. Is this RATIONAL PLANNING COMMISSION SUPPORTED THAT NUMBER IT IS THE MAXIMUM NUMBER WE COULD CHARGE RIGHT MAXIMUM MEANS IT COULD BE LOWER BUT WHEN YOU DO THE MATH YOU REALIZE THAT GENERATES SEVEN HUNDRED THIRTY EIGHT THOUSAND AND TEN DOLLARS TO GO TOWARDS THE AFFORDABLE UNIT IF YOU'RE PAYING AN OFFSET FEE PER THE NINETY ONE DOLLARS AT THE CALCULATION METHOD THAT WE'RE SUPPORTING AND THAT SEEMS PRETTY IN ALIGNMENT WITH WHAT WE'RE HEARING FOR THE COST OF THAT SO IF YOU'RE NOT BUILDING A UNIT IT'S GOING TO COST US THAT MUCH TO BUILD THE UNIT It seems right that maybe it should be about the same.

You're also getting the benefit, as the developer, getting the benefit of not having to. Correct. there is no relationship with the government that's required for the unit. So for 90 years or whatever. So, okay. Um, I'm going to move on. I want to go to net livable area and I want to ask you a question and you tell me if I'm right or wrong, because I still don't know what net livable area is. If you have a project and the average unit size is, let's say a thousand square feet. Okay. And, um, you have 10 units. Is it 10 times 1,000? Yes. Okay, so that's the simple calculation. It's the average unit size times the number of units.

I would also make the statement it is the total amount of residential square footage divided by the number of units to get the average. All three of those numbers play together. AUD is just what a lot of people know here because we require it. But remember, we're also looking at applying this to non-AUD projects, which don't have to calculate an average unit size. So we were looking at the initial value. What is the total amount of residential square footage in all the units? That's what this is based on. AUD just happens to take it one step further and divide it by the total number of units.

So you could play it both ways logically, yes. But you, whether you use AUD or not, you're going to have to calculate an average unit size to get to the net livable square feet.

No, you just sum all of the residential units together. Just as how you get an average. You can't get an average without knowing what the total is. So we're just saying don't divide it.

Yeah. You have one that's 800 square feet and another that's 1,000 square feet, so that's 1,800 square feet and on and on. Okay. Yeah, that's fine. It takes out the one step. Correct.

Yeah, it's a little less math.

Yeah. Okay. Okay. So that's good. I'm glad to know that. I'm actually very relieved to know that. And you talk in the IN YOUR STAFF REPORT ABOUT AN OFFSET FEE. IS THAT THE SAME THING AS A FEE OUT?

IT IS, YES. I HAVE THIS SLIDE UP. IT'S PERFECT. IF WE HAVE THE IN LIEU FEE FOR PROJECTS THAT ARE THE FRACTIONALS, IF YOU'RE BUILDING ON-SITE UNITS THAT YOU'RE SUPPOSED TO, THIS 4.3 EXAMPLE I KEEP GOING BACK TO, IF YOU'RE BUILDING THOSE FOUR UNITS, THAT .3 IS CHARGED AT THE IN LIEU FEE RATE LISTED UP HERE, WHICH IN THIS PROJECT WOULD BE A 50. Now, if you don't want to build any units at all or you don't want to build the amount you're supposed to be building, 4.3, right, 4, then it's the offset fee because it would be really confusing to have two in lieu fees that mean different things. I tried to come up with a name that was different. I am open to suggestions if these names don't make sense, but this is how I was trying to think about them as two separate fees, either building units or not building units.

So your presentation today called it fee out. but it's really offset fee. And could we make that consistent somewhere and have a definition of that so we know that, because that confused me a little bit. Is a fee out the same thing as the offset fee? I think it is.

I guess feeing out is more the process. I am feeing out.

So I'm paying a fee to offset. That sounds like planners.

I know, doesn't it? I've been staring at this too long.

Okay, which takes me to my next question. since some of us don't have planners speak, are we going to have a handout for this for applicants and developers and anyone that's interested that actually goes through these calculations, each one of them to... That is the intention, yes.

It's just that is after it gets adopted, the handout is done because it's just a...

Because I think without it, heads are going to spin without it. So, okay. And then I just have one more question so far, and that is on page 25, you talk about a 10% increase for each year that payment is delayed. So that's, I guess, for each year the in lieu fee payment is delayed. So after they get their building permit, they have up to one year to pay the in lieu fee. Is that right?

Sorry, no, let me, I have a slide real quick that I'm trying to pull up, and then I will, sorry, too many things going on at once. But when we look at...

It's more of a technical question, but I just want to make sure that we're not losing out on this.

So just prior to where it says that delayed payment, if you go to the top under D, it's actually on the previous page, page 24 of the ordinance, D says timing of payment. And so it says that you must pay your inclusionary housing fee prior to building permit issuance. And then within that, there's a couple different timings, one of which is if you don't want to pay a building permit and you would instead like to pay it by certificate of occupancy, you may, but understand that it either will be an increase like that you're referencing or it'll be charged at the fee rate at the time of payment which if you delay three years might be significantly higher depending on what the CCCI says. So we're trying to build in flexibility where we can to this ordinance by saying you have to do it here but if you don't want to there's less other option you can elect to do but the other option does have some strengths.

So if you if you Now I'm even a little more confused. So if you, I understood that you, so are you saying you have to pay it at the time of the building permit, but you can opt to wait till C of O? Correct. But can you opt to wait a year or 11 months and 29 or 30 days? I mean, you have to pay it before C of O.

When you pay it before C of O, we don't care.

But, okay, if C of O comes 29, I'm sorry, if C of O comes 11 months and 29 days after the building permit, which is probably impossible in this town.

We can dream, yeah.

If it did, you could pay it then and not pay the 10% increase.

So notice there's two options. It's the greater of the following. So A being the 10% that you're referencing, or B if the in lieu fee increases. has changed based on the CCCI, so it depends. If you don't pay it by building permit, it will increase. Okay, okay, that's good to know. It will increase if you don't pay it by building permit. If we issue building permit, your fee payment has gone up no matter what. How much it's gone up, I don't know.

It's the greater of the two. I just want the local housing trust fund to get the money ASAP.

And that's why we were disincentivizing a delayed payment because we want it at building... permit issuance, it's also easier to track, right, if they're all at building permit issuance and not sometimes this and sometimes that and don't forget over here. So we're looking not only at understanding, like, when the fees are coming in, but making it consistent. And if you don't or can't, however why, you can pay later. Just understand there is repercussions to that choice.

Okay. And I think, yeah, that's all the questions I have for now. Thank you, Madam Chair.

Okay.

Back to Commissioner Ward, though.

really appreciate this conversation. It's very helpful. Um, so kind of switching gears to the, um, home ownership aspect. So in that, um, in that calculation, we're talking about 71, $72. Are we at all concerned that we are going to inadvertently incentivize condo buildings over rental units? Cause I do believe that like when we're talking about this, and I'm thinking about this really about the context of downtown, because I think we're all really aligning on how do we get housing downtown for a whole host of reasons. So what is staff's thoughts on like the, if we go with 91 on the rental for the fee out, but then we go with 72 on the condos, like how does that interplay?

I have asked that question of the consultant as well, because I was like, wait a minute, why are they different? And it has to do with the induced demand, as it were. documented in the residential nexus study about what the maximum legal fee is. It's higher for rental. Why is that? We'd have to go through and read it page by page off the top of my head. I don't remember anymore, but it is different.

Is it because rentals over time, especially where we are today as a city, continue to increase in revenue? Rents go up over time. Is that part of it? Maybe you don't know.

I am not an economist, so I couldn't speak to it, but it seems like a rational idea. Okay.

Um, and I also really appreciate commissioner Wiscombe's comments because yes, that was my understanding of why we were pursuing the fee out. I understand that most cities do not allow for a fee out, but I think that the trying to balance this of we want housing and we don't get any inclusionary units and we don't get any money if nobody builds anything. So how do we balance that? But I think, you know, the calculations that Wiscombe just mentioned, made me feel better in that if the cost is commiserate with the cost of construction, earlier you had said that the cost that we're talking about at 91 is higher than the cost of construction.

By about $10 a square foot, if I'm remembering correctly. Again, looking at those tables that I've now referenced a few times, I'm going to pull it up really quick because it has those, and they're not as drastically different as I think you're fearing they may be. So give me a moment to find it. No, that's not it. So for the rental, it's low 70s for the construction cost.

Right.

Whereas ownership, it's actually low 80s.

Interesting. Okay.

That's what the evaluation said for the cost to construct those units would be.

So understanding our interest in really focusing housing downtown, have we contemplated, and I am kind of talking to Mr. Busk about this, lowering the inclusionary just for downtown to incentivize housing downtown. Like if we do 91 throughout the city but we lower the inclusionary in the CBD to 71 to really incentivize that we get some buildings. Because I am concerned that even if we do this that we're not materially changing the outcome and we're obviously all frustrated with the outcome that we have today. And so how do we balance this and understanding that kind of alignment is moving towards downtown. What are your thoughts on that?

Commissioner Wardlow, that's exactly the type of consideration that we would have with the downtown incentive program that we're working on. So we want to see where this lands, and then the idea would be to do better than that in the downtown as an incentive. Okay.

So that will be figured out in that process. Now, the other concern, though, is how long is it going to take us to get that going? So, you know... I want to be cognizant of what we set here is what the rules will be now and faster versus what we get out of the Better Buildings Program, which I'm excited about that. But I also think that all of this has to be predicated on the work that we do on the lots, because that really seems where we're going to actually get the most affordability, and getting the funding for that is seeming to be contingent on us getting market rate buildings to then contribute into this housing trust fund to actually have the money to do this in a meaningful way. So would your recommendation be then that, like, what do you recommend?

Commissioner Ward, those are very good considerations. And personally, I feel like the faster we can move with the better buildings ordinance, the better. I do think There is momentum right now and I think that the longer we wait, we just miss opportunities. So I absolutely agree with that. However, we also need to balance all the comments that we heard at the joint meeting and respond thoughtfully to those. And so we haven't yet set up the schedule for when that ordinance will be complete. even if we move as fast as we can, it will lag behind this inclusionary ordinance because they are already here at Planning Commission and so we're already a little bit behind in that sense. So this ordinance will come first. My recommendation, I don't know that you need to change this ordinance in contemplating how you want to incentivize the downtown. I do think that's gonna come soon enough that You can apply this citywide and not be concerned too much about the lag time, but I understand your concern, and there's no guarantees, right? I'm not giving you a timeline, so I can't promise anything right now. So something for you to consider.

So I don't even know if this is possible, and I don't even know if I support it. I'm just throwing it out there for food for thought. Is there... Is there a possibility of us saying, look for the downtown core where we're all focused on getting housing and getting this going quickly, that we have the inclusionary set at 72 or 73 or whatever is commiserate with construction costs for that area, and then have it be the other for the broader? And again, I don't know that I actually support that. I just want to understand if it's even possible.

Commissioner Ward, though, I'd say yes, theoretically it's possible, just the way we wrote that into the adaptive reuse? Is there separate considerations for the downtown?

Because that's, you know, when we're looking at adaptive reuse, and I do really want to encourage that as much as possible, right? So that's why I think, you know, I understand why we landed where we did on the inclusion area around that. But if If we're also pursuing an entire process on the better building programs in general, we're recognizing the need for kind of all housing types. I just want to ensure that as we make these adjustments that we're going to get the outcomes that we want. And I'm nervous about the trade-offs here, because I do think it's really important that we get as much money as we can into the Local Housing Trust Fund. And I appreciate staff's work to build that specifically into this ordinance, that it's very clear that the in lieu fees will go directly towards that. you know, if we set this too high and we just still stay where we are today where no one's building, then we don't get either of those things. And so that's my concern, but I also don't, I get why we want to encourage them to build the units because that is the best case scenario. The flip side is they're not doing that. So.

And Commissioner Wardlow, just as a reminder, you know, some of the recommendations that were in that inclusionary study were geared at making it more feasible for So we do hope that, for example, by having the density on top of what you're allowed, it's gonna make it more feasible. We hope that's gonna help move the needle a little bit. We just don't know until it's in place and we can see.

And I do think that's a really important piece of this, the fact that we're now allowing density on top of it. That's something I definitely really support and appreciate staff work on that. Okay, I will let more colleagues weigh in. Thank you, though, for answering my questions. I'm gonna go to Commissioner Bauke next.

Thank you, Madam Chair. First off, thank you for your hard work. There's a lot here, and I think it's part of what we're dealing. This is a lot of information, and it's pretty complex, honestly. Could you pull up slide 14? Yeah, okay. And we had a conversation, a sidebar yesterday, and it goes back to my experience with in lieu affordable housing provisions and other communities. And what I found in our prior conversation, not yours and mine, but the one that the commission had is we, I think we're thinking the livable floor area was that of the inclusionary units. and that the math was all based upon, and it goes back to one of my fellow commissioners' comments about how much would it cost to construct something, and what's the choice of, A, writing a check and getting the government out of my way, or physically building it? And I think we didn't quite take into account that you're talking the livable floor area for the whole. And so I think there's been a, we've all struggled with that. And my question is, because my experience with other communities is they would just say, okay, our average unit size, because we get a mix and every community has its mix from studios, one bedrooms, two and three. And usually when you're in rentals, you don't really get past that. but they come up with an average unit size for their community and just apply the fee rate to that for the units that are not being built, period. Has there been any consideration of just doing something much more simple like that? So I think the developers were somewhat confused because I know some of them didn't quite understand that it was to the whole or they understood it to the whole, we didn't understand it was to the whole. Could we do something like that?

Commissioner Bauke, you could. Would I recommend doing it? Probably not. We did look at quite a few jurisdictions because everybody does it their own special way. Some of them do it by just the habitable space and have the fee rate and that's it. It doesn't matter what your inclusionary requirement is. Some of them do it per unit cost. So it's just a really big number that is then multiplied by some variable fraction. Some of them do based on the size of the units, the square foot of the unit in your requirement. I mean, as many permutations as you can think of out there, they exist. We considered alternative ways to do it, but this is the way we have been doing it, and it's been working. So we said, we don't need to change it. It is already done. playing out the way we want to. I will note I did the math based on just the unit square footage. In every single instance, just remove the last digit. So instead of being 121,000, this would be 12. For the other one that's 3 million, it would be 300,000. So when you do the math and figure out, to Commissioner Wiscombe's point, how much does that generate to support the creation of a unit, it is 1 tenth. 73,000 instead of 730,000 would be created if we used the average unit size here instead of the net floor area for all of the residential units of the buildings. We looked into it. We looked at how other jurisdictions do it. We elected to maintain some consistency because it's what we have and it's how the study was evaluated to generate THE RATES THAT WE BROUGHT FORWARD.

YOU WOULD HAVE ELIMINATED THAT FRACTION AT THE BEGINNING OF THE FORMULA, BUT THEN THE DOLLARS PER SQUARE FLOAT WOULD HAVE BEEN COMPLETELY DIFFERENT.

CLOSER TO REALITY. GOOD LUCK TRYING TO BUILD SOMETHING EVEN FOR $91. THINKING ABOUT IT THAT WAY,

You have to remember that fraction in the front. Without the fraction, this formula is bonkers. But the fraction is what's telling you what's the inclusionary requirement you're trying to meet. We could have taken the fraction out and done it completely differently, but it would not be a $50 a square foot like shown on this page. It would have been a completely different value. So it was something that was considered. It was something that we just continued on the path that we were already on.

Okay. And then I'm going to go to slide 21, which you asked for some feedback on, which was, is that the right number or did I get it wrong?

What content were you looking for?

I thought it was 21. Maybe I got it wrong. It was a question about... PHYSICALLY BUILDING THE UNITS ELSEWHERE, NOT WITHIN THE PROJECT, BUT OFF-SITE.

OFF-SITE UNITS. THESE ARE ALTERNATIVE COMPLIANCE METHODS. IN ESSENCE, THIS IS SAYING THERE ARE NOW FOUR WAYS THAT YOU CAN COMPLY, FOUR OPTIONS, TO COMPLY WITH OUR INCLUSIONARY HOUSING REQUIREMENTS. THESE DID DIFFER PREVIOUSLY BETWEEN RENTAL AND OWNERSHIP, SO PART OF THE EFFORT TO MAKE A PROGRAM VERSUS A MULTITUDE OF PROGRAMS IN DIFFERENT LOCATIONS WITH DIFFERENT REQUIREMENTS WAS let's make all the compliance methods available to all project types, rental or ownership, and make them the same. And so that's what this slide is showing, that you can do the on-site units and the fractional in lieu fees, which we've now talked about quite a lot. You can either do off-site units. There's objective requirements for those, as well as you could acquire and rehabilitate units. Again, objective standards. Or you could fee out, offset fee, whatever terminology we end up using going forward for consistency. So those are four different ways that you can meet inclusionary. Yeah.

And my comment on that, especially when you get to the off-site, I would think we would want to at least harmonize ourself with state density bonus law, which has the quarter mile requirement. Yes. Unless you have some other reason to go beyond that, but I think that would be sort of the starting point is to start with that thought process.

And we did discuss what would be the location parameters for those off-site units in relation to the existing or the main project for lack of a better term. Because we were looking at allowing this as predictable as possible and understanding that some of our city is more difficult to develop, we wanted to make sure that if a project was doing this that they would provide them within a certain set distance, we chose a mile, or within, it's a resource area mapping done by the state that California, tax committee allocation committee, TCAC. They do an opportunity map online. It has to do with a lot of variables and say we were proposing you have to provide those off-site units in the same resource category level or a higher one so that if those off-site units aren't being done on-site, we would hope they would be, but they're not being put in a less desirable or less opportunistic area of town. We did look at the requirements and looking at quarter mile, half mile, one mile, one and a half miles. What does that mean? If we're looking here, how far can I do? How many parcels does that mean? I did a whole lot of mapping and buffering and what does this mean? How do I offer the flexibility? And we settled on a mile as what we're recommending.

And part of that is to be more flexible than state density bonus law. That was intentional that we wanted to have more flexibility.

And that leads me to actually my last question here was, has somebody done a comparative analysis of state density bonus as far as the economics of a project based on that versus what our NLU is? Yes, it's in the study. At this point, I mean, it was weeks ago we had that package in my brain. And it was more feasible to do state density bonus law. Probably flushed half of it, but okay.

Yeah, so we did look at the prototype five, which I've been using as the example throughout today. We looked at what if that project, instead of doing inclusionary and the 43 units, what if they decided to use state density bonus law at two different levels, and what would that do to the feasibility of a project? Unsurprisingly, based on the trends we're seeing in development locally, state density bonus law is more feasible. And so that's why a lot of the recommendations in the study were looking at the feasibility of what a project is, but we're not solely focused on the feasibility alone because this is a local policy decision as well. So it was part of the thinking and we analyzed it at the outset to be able to always remember that's in the back of our head. This is something available to an applicant and what does that mean to their development as we're trying to really balance these competing needs these competing kind of goals, right? Create new housing and prioritize affordable housing.

Okay, one last one once you've triggered. If we're trying to get housing, I think that's the whole concept here. I'm trying to figure out a methodology in which would basically unlock the private sector. and basically go, okay, fine, we'll let you just go at it within our, you know, sort of what our vision for our community is. And that leads me back to something I've harped on as some kind of value capture thing, which is basically let them go do it, but suck most of that change of assessed valuation into the trust fund and then take that money and leverage it How much thought is, I know we've touched with the EFID conversation, but how much conversation about maybe just making this more of a free market system, but take the benefits of it to get what we really need. This way we won't have these complaints from the development community that you're shackling us, but at the same time, within our guidance and our boundaries as to what we want to see, and We need to provide them with a clear idea of what that vision is. Can we do that? And is there a way to do that? Or has that been discussed? Or is that part of what Allison's kicking around with? Yeah.

I'm going to defer to the powers that be. Yeah, no.

I think this is sort of a bigger level with the city manager's office.

Yes, Commissioner Bauke. It is something that the city administrator's office has been handling. and it wasn't really something that we were focused on with this study. Our main focus here was, you know, our in lieu fee rates are way too low, you know, let's get those up to current speed. Also, we recognize, you know, we don't think our program's feasible based on what we're seeing. What can we do to fix that? And so those are the things that have been incorporated into this. You know, if you look at the numbers, the percentages, it's not changing that much from what we have right now, so really the tweaks kind of around the edges related to in lieu fees and making it more feasible. In terms of just other larger economic ways of capturing the value, we haven't really been coordinating those two efforts.

You just heard one more thought sorry Which is oh, no, we have a staff right now Hi, I'm Carrie Payne.

I'm the housing and homeless services manager. So the affordable housing and Conversation is in my department and I just wanted to note that kind of yes and to your question that we are exploring a permanent funding sources for the local housing trust fund. We want to look creatively at other ways to incentivize affordable housing development and when we get there I think absolutely everybody will want to re-look at some of these ordinances as well because that's the beauty of all of this work is that we're all humans and make decisions and it can be different in the future. So I think as we go forward and come up with those solutions that there will be opportunities to revisit things. But right now this is the conversation. These are the tools in the toolbox. And so we want to just make sure that we're maximizing those and making sure that they're as effective as possible.

Thank you. The other question which is back to I remember from reading your big package last time and also other studies and presentations by members of the public and stuff that's out in the public domain as to the fact of the nexus question is if you build x number of market units what percentage of additional demand of affordable housing do we create because that's you know that's we don't want to make this situation any worse and i know that's you know this is where this dialogue about it and Inclusionary housing really is on that foundation Honestly, it's it's not we're out there try to punish the developers, but we don't but we don't want to make our situation worse What was that number for the and it varies by city? So I just wonder what was our number?

I don't remember what it was I Have it just let me look So it was say appendix D I It's been a while since I've read this that closely, but where is it, where is it, where is it? It's one of the tables. I circled it. Sorry, just let me find it. Oh, I found it. Okay. So for every 100 units of multifamily rental housing in Santa Barbara generates a need for approximately 40 housing units for local workers in total, including approximately 21 units for acutely low, extremely low, very low, and low income. So that's rental. Now for ownership. Looking again at the same 100 units of condominium ownership housing in Santa Barbara generates a need for approximately 45 housing units for local workers in total, including approximately 23 units affordable to acutely low, extremely low, very low, and low. That's table 26, if you're interested.

And really, back to my fellow commissioners, that's sort of the foundational question.

Correct. And that's why when we were bringing the study forward, we suggested to maintain the current requirements of 10% and 15% for rental and ownership. It was looking at this. It was looking at feasibility. It was looking at policy guidance to say, how do we straddle this divide between these two conflicting and often competing free market let it do what it needs to do versus we need to have some kind of government oversight to create these because they're not occurring naturally. And always harkening back to understanding that there is a demand created by every market rate unit that's there. But I do want to say we don't want to strangle market rate development as well because of this either. We do need to find balance. Unfortunately, the balance is different for every single person who looks at this, but the study was trying to come forward with a balanced method to continue to not fully stop market rate projects. I'm also understanding there's other avenues for development, as well as creating those affordable housing units that are getting demanded by every creation.

Okay. Thank you. That's all I have.

Okay.

Commissioner Wiscombe. Thank you, Madam Chair. I just wanted to comment and ask a question about Commissioner Wardlow's comment about perhaps lowering from $91 down. I gather that's what you wanted to do.

For the CBD, not across the city.

Yeah, I understand it's in the CBD, but My question, I guess, to staff is what is our goal here? Isn't it to actually build a housing? Because if you lower that fee, then you're gonna get, it's an offset fee, and you're gonna get more downtown developers saying, no, I'm gonna just opt out of building the housing, and we're gonna lose some economic diversity downtown, I think. That's my feeling. I don't know if staff has considered lowering that number. I know some people think it's really high, but it seems to me, based on that calculation we saw for the 4.3 units, that it was very reasonable, because we've always talked about how much it costs to build a unit, and it's always been in that price range.

And we did look at what fee rate should we charge, to your point. when we did the math and saw how much it generates to create that affordable unit, it aligned pretty closely with stated figures from our local housing authority. And it also made sense because this project isn't constructing those units, so you don't have all of the financing costs upfront to be able to construct that. You're able to turn a profit on those units that you wouldn't have before. There was just so many factors that went into it that logically it made sense that we wanted to prioritize unit creation, make it less expensive in very simple terminology for a developer to build those units on site than to fee out, to pay an offset fee. The offset fee could be changed depending on what the stated priorities are and to Commissioner Wardlow's point, maybe it's a different offset fee in different geographic locations to that point. But when we were looking at this program, it's a city-wide program. we were saying we want onsite units, so the fee to not build units should not be lower than what the cost is to build those units.

Yeah, that's what I thought, and I'm not saying that you advocated for it, because you said you didn't know how you felt about it, but I was, I guess I just felt that staff needed to address that, because I think our goal is to get the housing, but there are going to be some developers that just say, I'm not going to build it because I don't want to manage it for 90 years, and You know, so I'm just going to pay the fee and move on. And it seems to me that's what we've heard for years from developers. Give us that option to do that. And this seems very reasonable. So that's my comment. Thanks. Thank you. Commissioner Wardlow.

Is it okay that I, like, respond to Commissioner Wiscombe?

No? Sort of?

Okay. Well, I think what I'm trying to understand, so I very much want to see, housing units downtown that have affordability in them. My concern is that we're not getting that. And so I'm trying to figure out a way that we can meaningly start to get housing downtown while understanding that we are about to, and this is very important to me, that we vigorously pursue our plan around bringing affordable housing to city-owned assets and lots downtown. And given the ongoing discussion about how do we fund the affordable, the local housing trust fund, This to me could be a way that we start to get funding to support those efforts. Because I'm concerned that if we don't start to make it easier to build downtown that we're not, we're gonna continue doing what we're doing which we're not getting buildings downtown. But I am concerned to Commissioner Wiscombe's point that then we don't get any of the affordable units built into the larger market rate projects which is the policy direction that we want. I'm just concerned that we're not getting the outcomes from that. And so how do we balance that? And so, yeah, I'm just, I'm really torn on this because I want to see us make progress. And, you know, I agree with Commissioner Wiscombe that my understanding from the development community was give us the ability to fee out and we'll fee out. And that's exactly what you've proposed. And I appreciate the work that staff has done to push the consultant to consider that given that's not standard practice in these types of programs. But if the fee is higher than the cost of construction, I'm worried that then we just end up where we are. So if there's like a middle ground there or something that we could pursue, specifically for the CBD district, understanding that we know that it's more costly to build down there, the price of land, all the things that we already know, Maybe there's some wiggle room there. I do want to hear from my colleagues on what they feel. But that's the balance I'm trying to strike, just understanding that after being on this commission for five years, it's been very difficult for us to actually see these projects come to fruition. And Commissioner Wiscombe has even more experience and longer tenure on the commission. So where that balance is, I am open to, because I think we share the same goal of really ensuring that ideally they build the units. But because we're just not getting there, I'm, you know, I'm concerned. And so I'm trying to think of like, you know, for the CBD district where we're really trying to prioritize for a whole host of other reasons, you know, is there some flexibility there that then, you know, if people don't build the units that at least we're then getting substantial funding into the local housing trust fund. to support our other really big priority where we know we're going to get affordability, which is through, you know, building on city-owned assets. So that's the kind of tradeoff because I think if we were to lower the fee a little bit, understanding that they're probably not going to build the units then, but then we're getting substantial money, you know, $700,000, $800,000, you know, a million dollars per project, like that then can be, to Commissioner Barnwell's point, you know, quadrupled or tenfolded by the housing authority. So I understand that this is a conversation about the amendment specific to this ordinance, but it's in the context of the broader goals that we're all considering and we're all working on around housing. So that's the balance I'm trying to strike and I really do, I'm quite torn about this and I look forward to hearing from my other commissioners. And I also appreciate Commissioner Bauke's points on how this all intersects with state law is also a whole other consideration, right? We have to be competitive enough that people are actually utilizing our program because I think from a community character and preserving the charm of what we all love about Santa Barbara, we're concerned about the use of state bonus density law and sidestepping some of our processes that ensure that these buildings are beautiful and really maintain the character and charm of our community. So all of those things combined is what is making me question, do we go, you know, to the max level in the downtown when we have these other considerations that we're trying to really prioritize and that we know we can get more affordability out of the city's pursuit of the city lots, because even in these projects, 10%, and I think we all know, you know, I wanted to increase the inclusion area. Clearly that's not happening, but, you know, because it's just not financially viable as we've proven through the market, right? It's just not working. So if we're only getting a couple units here and there, is that worth it for the trade-off of getting substantial funding towards really doubling down on what we can do on the city-owned assets and building true affordable workforce housing? I'd love to hear from my fellow commissioners, because I'm truly torn on this. I think we all want the same thing. It's just about how do we meaningfully get there?

I think we're kind of veering into comments and deliberations, but I want to make sure that we finish up questions first. But I also think staff may have wanted to respond at some point during that.

I was just going to say that you've articulated the conundrum. This is the policy conversation. And yes, we did a study, an economic study, to try and nail it down. But that's also one point in time. You know, interest rates change, everything changes, and so we're all just doing our best to find that sweet spot.

And Commissioner Peterson, did you still have a question?

No, no, comments. Okay. I thought we were moving to comments.

Sorry, I let us go there.

I apologize.

No, you're fine. Are there other questions?

Do you have questions?

My questions have been asked and answered several times. Do we want to take a break before we go to, yes, okay. So it is 2.43 right now. Let's be back by 2.50.

Seven minutes, that's true.

Thank you.

2.52 p.m., and we'll open it up for comments and deliberations. Commissioner Peterson?

Do you want to ask a question?

Commissioner Wardlow.

So, and I meant to ask this earlier, but, and I know that we have talked about this extensively, about the residual land value, and I know that this, you know, in the previous hearing, we were all concerned about the way in which the report was done, why we used these calculations compared to the previous inclusionary study that used a different type of calculation, and obviously the benchmark set a 10% versus, like, a 7% or 8%, which is more a normal kind of return, but... When I'm looking at the 91 for the fee out, I saw somewhere here that it says it creates that at a 91 full fee out case produced a negative residual land value of about negative $34 a square foot. Can you explain that more?

I could try. Unfortunately, we don't have the consultant here with us today who could speak to it more eloquently than I. But that project under that consideration is not benefiting from the recommendations that increase feasibility. So I've mentioned a few times rental units as bonus units. So that means that project, if you are looking at the table in that exhibit, a project that's building those units actually gets to do 43 market rate units and four inclusionary units. So that's a total of 47 units. That dramatically changes your feasibility for the better. But when you can no longer do 47 units, your feasibility doesn't benefit from those extra units, as well as the changes to rent and a couple of the other little triggers. So when you look at it cumulatively, doing those inclusionary units on site do benefit the project, the financials of it. Whereas when you look at the fee out option, it doesn't benefit from those improving feasibility measures.

Because the base density, because the inclusionary units now we're allowing to be on top of the base density. Correct.

That's recommendation F, which we're incorporating. And that was the biggest driver for doing that. One, it aligns everything together, rental and ownership, but it really improves the feasibility of these projects, which is something we were always keeping on that balance table. We want these projects to move forward.

But it it goes back to the point that like the, the fee out program that we're talking about, it is financially a lot more challenging versus if we were to, and I'm still a little confused on what is the exact, like commiserate with construction costs figure. Um, if we could get that, that would be, that would be helpful for me. I don't know if it's helpful to anybody else at this point, but, um, that that's my concern is that we're still, if we're allowing the fee out, it seems like people probably may not do it because it's, Negative on the financial side for them and yet I'm just okay. I'm done.

I'll let somebody else speak now Yeah, and I just I want to draw attention to this slide which again is a very very high level summary of that the feasibility analysis the consultant did the feasibility does decrease with g2 to the points that I made because we are trying to Prioritize the creation of those units if we made it easier to not build units and instead pay a fee no rational actor just based on the economics that the pro formas are able to look at would choose to do that. So therefore it undermines that prioritization which as staff we didn't want to recommend.

But then so if we came up with a happy middle part let's say 75 I'm just making up a number then doesn't that wouldn't that ensure that like then they do fee out and we get the money but then we're just not going to get the units in that case.

And that's the cost benefit analysis that needs to be done at a policy level. Do we Are we okay with maybe charging less, letting the developer have less heartache by not building the units and we'll get the fees, which is great. We can turn it into something else, either on the city on land that you commissioner Wardlow have mentioned, or taking it to housing authority or an equivalent. much like Commissioner Barnwell has mentioned, there is. And that is a policy decision we've done. The analysis, 91 for rental, made sense to staff as we were looking through it because we are trying to prioritize the creation of onsite units.

But if you're saying that because we're now allowing the base density, the inclusionary to be on top of the base density, and that that is financially in some ways better, right? Yes, it is. Is there a number that we can come up with that ensures that that's still financially better because you're getting the base density piece on top of it, but that the fee out is not financially worse than just... Is there a middle ground here?

There definitely is, but that would deprioritize the creation of on-site units because it'd make it just as effectively the same cost to a developer to do this. which if that was the policy direction we were given, we could have brought that forward, but it wasn't. We were told on-site units are the priority, so we aligned the fee with that mentality. The fee could be lowered, but it would deprioritize creating units on-site, which we didn't see aligning with the direction we were given.

I really appreciate all of your tremendous work on this, and thank you for entertaining all of my questions. Thank you.

Commissioner Peterson. Are we in comments now, just FYI? Yes. Okay. Thank you.

Okay, we're in comments. I think earlier it was said that developers would like a $0 rate. That's the thing that pencils out. But I hope that there's a number that works more than that. if we do some innovative things and if we provide concessions. And I think one of the contexts of all of this is state density bonus law. I think that's the reality under which we're operating. It's not either we get 10% or we get nothing. It's either they use our local program or they don't build at all or they use state density bonus law. And so I'm really hoping that there's some kind of information that we can find and some sweet spot that we can determine amidst a variety of factors and interests. I think there's questions that exist. How do we get people to build? How do we get the money for the affordable housing trust fund? How do we incentivize developers to use our program rather than state density bonus law? And is the answer to that question some kind of concession or to Commissioner Bauke's value added or value capture proposal? I'll support that, whatever works. I think we have interests here that we want to see aligned or solved and it's like a Venn diagram. I know that we want affordable housing downtown and there's been policy direction to have affordable housing within these units. but for those powers that be that are listening, would we rather see two units in a 20 unit project or would we rather see the housing authority build a 20 unit project across the street and also have that 20 unit project? I think that's a legitimate question. I don't think it's alienation. I think we're talking about the same neighborhoods here, potentially the same neighborhoods There's a parking lot right outside this building that could be one of those. And it's a question of leverage too. I think we talk about, oh, we're trying to capture the amount of money that would actually take to build these units. But building affordable units in market rate projects is cheaper than what the housing authority spends in building them. So that's a factor. And then also the housing authority costs. can leverage that money. And so do we really need the full amount to satisfy the other concerns about the contextualization of, well, they'll just use another program or they won't build. And so I think I'm not trying to water anything down. I think these are legitimate questions that we need more information on to make informed decisions. And My only comment, I think some of my comments would be summarized in the question of can we get more information. But I'll be supportive of where this ends up. Thank you.

Commissioner Barnwell.

Thank you, Madam Chair. I'll start with what he just ended with. I'm going to be supportive of whatever we come with, but boy, there's a lot of asterisks and footnotes to my support. I understand that this is tied into so many other things that we're doing associated with housing. One of the public speakers said that, Mr. Lewis, said that only five middle income or moderate units had been built. I'm curious, how many units have been built under the current program that we have? Do we have any idea?

We do. Give me one second. While you talk, I will find it. We do.

And it came up in our first discussion. I know that we keep throwing out the word affordable, but this is aimed at moderate affordable, 100%, right? Because the in lieu fee, if we give it to, and I use the general term housing authority, if we give the in lieu fee to the housing authority, they're not going to be able to use their multiplier for moderate type housing because it isn't available for that category. And I think that distinction is really, really important. And I don't think, to go back to what I was commenting about the council, everybody at the city council is just like us. We're like, what are we talking about here? What are the details of what we're talking about? I think that's an important detail. When we use the category term affordable, we're really talking with this ordinance about how do we get more moderate housing. That's what this is designed to do. It is not designed to get us more low and very low, et cetera, et cetera. And I'm not sure that we've covered all those bases. I almost wish we could have sat at a big round table with coffee for everybody and said, OK, let's start at 8 in the morning, and we'll go for three or four days this week and talk about it, and get some developers in there. Because for example, when we talk about the construction costs, and that would be the measure that the developer would compare against the cost of the fee out of the . The truth of the matter is that he has a 10-unit apartment house. That's only nine units in terms of his ability to turn around and sell it. It's nine market units plus an odd tenth unit that he offers on the open market. And so the income stream that he receives is diminished over the term of whatever it is. Is it 90 years? That is another thing that the developer, you can bet, is considering. It isn't just the construction cost. It's the reduction in the market value of his property. We didn't talk about that either, and that's unfortunate because those kinds of numbers, and we mentioned, well, we can't really get those numbers. We can get those numbers. People exist that can provide those numbers. Whether they're exactly correct or not, they give us a place to stand and look and say, okay, well, maybe it's a little high, maybe it's a little low, but there's a believable number there. Unfortunately, we don't have that in front of us. I don't know what else to say. We say this all the time, but this report is excellent, and your comprehension of this is excellent. And every single thing that we have said about, well, did you consider? You had considered it. It can't necessarily be the driver of the discussion, but you did consider it, and I deeply appreciate that. It's unfortunate that we can't know a little bit more about the hard number component of it. For example, the $91 versus the $35. My own studies suggest, and maybe Commissioner Wardlow mentioned it, the $75. My studies, based upon what I understand, the cost of construction, etc., My number is at closer to the $50 one that we landed at rather than the 91 that I was agreed upon when it first came to us a few months ago, the $50 seems. But then again, who knows? Who knows? We have to try it. So thank you, Madam Chair, and I want to thank all of my fellow commissioners, too, for bringing this. This requires... your thinking hat. And I appreciate everything you've given to us. I'm going to be supportive. Give it to the council and let them kick it around. Thank you.

Do we have other comments? Go ahead. Sorry, Vice Chair DeLuccio.

I was going to wait. I wanted to hear what my other commissions had to say, but that's fine. I think at this point we just need to move this to council. We're not the only city struggling with this. And if we don't, you know, it's like, but I think you've done a great job, staff, on this. And thank you, Commissioner Wiscombe, for helping me understand dissecting the $3 million that works out to like $738,000 a unit. So that puts it more into perspective. So I'm comfortable moving that forward to council, because I don't know what council's going to do. They may not go with it. They may lower the square foot. footage cost on it, so I'm fine with that. I think the strength of this is the fractional, the way we're gonna do the fractional numbers, that's gonna get us some money into the housing fund. That's maybe the strength of this. It's kind of ironic how we do need moderate units, we do need, what's the other word we're using?

We're using middle income for ownership.

Middle income, we need those. obviously we need low and low the lower side also but we need to do need to balance it out so um but it is very frustrating because we're not making we're not meeting the numbers we're not the only city not meeting the numbers so um but i think if that you we're at a point i think this should just be moved on to to council at this point and we need to as we go forward we need to obviously we need to continue on looking at this at housing and how we can actually Get more units in the city that are affordable. So I think those are my comments for now.

Thank you Commissioner Westcom Thank You madam chair Okay, I I Just did some calculations I think I think what we have to think about here that I understand Commissioner Ward Lowe's comments about lowering the the cost and i think commissioner peterson said you know are we better off not building the two units in the 20 unit building but building the 20 units of deed restricted housing across the street i think we have to realize or keep in mind that we're dealing with moderate units and and the leverage is different if if at all for moderate units when you come to when you come to um the local housing trust fund and whoever is building the affordable housing. And I agree with Commissioner, Vice Chair DiLuccio on, we're gonna get money from the fractional. And do we have any, have we done an estimate of based on our piddly little figures before for fractional of what we might get when we change the numbers?

I did not. I was looking at projects in the pipeline that are utilizing state density bonus law in comparison to non state density bonus law projects. But we also don't know when a project is gonna use one or the other. So there's projects in the pipeline that stall out. There's projects that come online that are different. It's nigh on impossible to do that, unfortunately. I tried to do it just to get a number. What could we anticipate? But any number I come up with would be wrong.

Okay, yeah. Well, I think it's a point that we have to realize, that we're going to get dollars for fractional. And the comment that you made, Ms. Faulk, on this, if we lower the fee, it deprioritizes on-site deed restricted units. And I think that's really important for diversity. I think we need those. I did just a calculation. If we lowered it to $72, I used $72 because that's what we were talking about before, that for those 4.3 units, it comes to $2,510,856, and that's $583,920 per unit, which I know is too low. It's over $100 a square foot, I think, to build a unit. So I just It's way too low, and you're just not going to get your goal, which is, you know, you want to build on-site deed restricted units. I think we do want that diversity. So I'm supportive of the program. I think I want to make sure that we get in our definition section net livable area, how we calculate that, whether it's AUD or you know, not AUD, and that we use the term offset fee rather than fee out just because that's, I think, what you, or pick one or the other, but have that as consistency and a definition for that. And I think, you know, my other comment is these numbers aren't written in stone. We don't, I mean, we can't, define these numbers to the point of saying, oh, this is a great number. 91 is a great number or 72 is a great number. We are doing our best guess and our best based on the feedback we've gotten from staff who have done a tremendous amount of work, thank you very much on this, and also from the community of developers, applicants, owners that build these projects. And that's many years of just them crying for this offset fee because they don't have to do it. And to Vice Chair DiLuccio's comment, which I totally agree with, it doesn't stop at the cost of the unit. It carries on for 90 years with paperwork and making sure that whoever is living in that unit deserves to live in that unit. And that it is indeed deed restricted. And that's a cost. So instead of the 10 units that you have, you actually only have nine units that are market rate, and then you have the one unit that could become, and according to some developers, is the albatross, which is why they want the offset fee. So I think you've done a fantastic job I think you have something defensible to present to council. And I'm happy to move this on with the additional definitions in there. And that's all I have to say. Thank you.

Thank you. Do we have comments from others? So we're specifically looking at comments or feedback on the fee for fractional fees. because that's changed since the last time it came to us, and also more specifically on G2. If you'd like. Yes. Commissioner Bauke.

Thank you, Madam Chair. This is a conundrum, honestly. And maybe it's just my instincts and knowing what I do for a living and run gap analysis and run the numbers on these things and looked at what the inclusionary impact on a project would be to the financials of what we would sell. Sometimes I was a land seller and sometimes we were the developer. So it's still the same number. You still go do the same math to figure out what the market value of the land is. And in all cases, no matter where it is in the state of California, there's some kind of inclusionary requirement of some shape or form, and that's just a cost, and that cost goes to the cost that a developer will buy a piece of land for when he does his analysis, and he's not gonna do it without making a return. There's a lot of things in that equation, finance costs, construction soft and hard costs, Those things are always moving, and with the current administration, things have gotten worse on a number of those categories, both on the input costs and the finance costs. So we're only a piece of this equation. Unfortunately, we can play with our number a little bit, but it's not necessarily going to guarantee that we're going to get housing built if those numbers don't get better on other things. landowners in this town accept the reality of the costs that are out there, may it be government cost or costs out in the global system for construction, that they're gonna have to sell their land for a lower dollar value. The problem is there's a lot of people parked money here, bought property, and they'll just sit. So I'm not sure how much we can force this the situation, other than make it at least equitable as to which policy direction we want to go. If we want it onsite, let's make that incentive to be the case. If we want to do some other method, which most developers, because there is definitely a cost. It's both the discounted cash flows of the property going forward. Mr. Barba mentioned some of those. The value of the property is constrained by that affordable housing unit. And also you just have the headache of having to deal with the paperwork. If somebody that's dealt with those things that's a cost factor so I would think we would want to at least if somebody wants to get out they're getting a benefit of getting out okay so I think that's the key thing where I'm going it's like okay you want to take that we shouldn't be incentivizing them to get out I think Benjamin was correct that we want to deal with that policy issue of is it in the project or adjacent? I think that's okay as long as if it's in the same proximity and it's an equal choice, not we're pushing them one way or the other. If they just want out, that's another conversation. Could we leverage the money into categories other than, because I don't think we have any mandate that we have to use the money that comes from the in lieu fee, to moderate units, we can use that to leverage the harder ones to get, which is the low and very low, and maybe a tad up above that. But the private market can do better at the other tiers. It's not as much of a hit. The gap analysis will tell you it's not as much to hit, but it's still a hit, which all goes back to it's the price of the land. So I keep thinking We just need to make this program such that it clearly articulates our goal. And I think that goal, at least what I discerned from the council, was when in doubt, we want it in the project. At least that was my understanding of that. And if that's the case, I think what you propose is going to get us that. But I think sort of, and this is my nature, is just to think bigger. We really need an overall game plan for affordable housing on each of these tiers, especially for the CBD. If we want most of new development happening in this constrained town, we have mountains and an ocean in our CBD, which can handle it better than any other locations, notwithstanding maybe La Cumbra Plaza and a couple other sites, but on a whole basis. we really need to figure out how we plan for getting the right mix into downtown. Because it needs to be the whole spectrum. Basically the spectrum of what that market rate generation rate is. It needs to match up with that. Or match up with our 8,001 units that we have to, we need to get that to happen. So I'm willing to move along with this, but I'm not happy with where we're at as far as understanding our choices. Because there's a lot of choices and there's a lot of moving parts here. But I think these are definitely big picture policy questions that the council needs to answer. I think we've asked all the right questions. So I'm willing to move forward with it. And I definitely support Commissioner Wiscombe's comments. That's pretty much where I was at on these. Thank you.

Has everybody given comments? I'm going to go to Commissioner Wardlow and then back to Commissioner Barnwell.

Okay.

Thank you, Madam Chair. I want to give a personal experience. I hope the legal counsel here doesn't stop me, but it has to do with what is the policing of the units to make sure that they remain affordable? Now, I know this sounds preposterous, but as an appraiser, I was given an assignment to appraise a 20 unit in Isla Vista. all market units, market rent. Normally, I get a copy of the deed and deed restrictions, but that was kind of a rough job. I didn't get that. I appraised it and went down to the bank in Los Angeles and they called me back about five days later and said, what have you done? These are all affordable units and you have used market rate rents and calculated the rent of this property based on that. I said, what do you mean they're affordable? I had no idea. The property manager over the course of five or six years, had gradually just slipped in market rent units in all 20 of these things. When I went to him, he said, oh God, you know, I know I was just kind of, and he had all these excuses, but I thought, oh my God, there was no policing of that. Now, when we give it to Rob and those guys over there, they're on top of it all the way, but this won't be that kind of a thing. It could easily be, as you have suggested, a 40-unit project with four affordable units in it. So I would toss that out. I would just want to toss that out because I think over time these things can get lost. Yes.

Just wanted to jump in really quick and say that we do an annual audit of all of our covenant deed-restricted units, both owner-occupied as well as the rental units. And so that includes the rent rolls, double-checking that they're within the standards, the rent. We have names on that list of who's renting which apartments, and we are pretty thorough about it. Good.

You're better than the county then. Very good. Thank you. Thank you, Madam Chair.

Okay.

Who's else going to hold that?

Commissioner Wardlow. Okay.

I kind of echo a lot of the comments from some of my fellow commissioners of like this is a conundrum. I think we all really want the same thing and I think we're struggling with how we actually ensure that we get there, that we actually get more housing projects and that we actually start to achieve better affordability. I'm really torn about this. I very much understand Commissioner Wiscombe's perspective that we want to see moderate income units included in these buildings. My concern is that we just aren't getting a lot of those projects. And when I think you are going to, I think staff was going to report back to Commissioner Barnwell on how many actual inclusionary units we have produced, because I think that's really important. So if you guys have those figures, I think it was like eight or 13 or something.

It's 21 owner and 13 rental.

13 rental. So we have a lot of conversations around affordable housing, right? And we all are committed to this. But when we're talking about 13 units over how much time?

Is that in the last? 2019 through end of calendar year 2025.

Oh, wow, that's worse than I thought. Okay, I thought that was from 2021 or since the beginning of this RHNA cycle. So since 2019, we've gotten 13 units.

Correct, that is when the inclusionary housing requirement for rental units went into place was July of 2019.

Yeah, okay, so that furthers kind of my concerns, right? So if we're getting such a small amount moderate which is what we all want to see but the numbers are really low and that also we're not getting as much just housing in general you know that really concerns me and I think we need to do something to ensure that we're actually making progress on these goals that I think we all share I want to start with just saying that I do believe that what we're doing in this ordinance is in terms of increasing and allowing the base density that the inclusionary units that you build on top of that, that that is a significant step forward. I really do hope that that makes a difference in how development picks up because I think that has been one of the big concerns. The second piece is the ability to fee out is another big concession that I think is a positive step forward. I am concerned that if we go with the 91 that we kind of just maintain where we are today, that we don't see really a change. that folks just won't be out and then they just won't build and we'll just be where we are. So I am supportive of potentially doing a $73 amount for the downtown, for the CBD district because I really believe that we need to get more housing in general and then that money that we could raise from that could be meaningfully put to good use where we can get much more levels of affordability and much more units on city-owned assets. I don't say that lightly. I definitely am concerned. I do want to see buildings with moderate income units in them, but given that we have only produced 13 of those units since we started this program, to me that makes it feel that this is not working to get the outcomes that we all say we want, and I know that we truly do want. So that's where I'm at. Obviously, this is a difficult conversation. And I know we all want the same things. And so I understand that my colleagues may not support me on that. But I just feel like we've got to try something different to increase the outcomes that we all want around housing. Oh, and then one other piece is just on the moderate piece. I think that when we're looking at the, and I'm sorry I keep tying these together, but I think they are interlinked, is that when we're talking about true affordability and addressing climate change and all the things that we understand of why housing is important to addressing broader economic vitality and all those things, that moderate income jobs you know, a lot of the jobs downtown are not at the moderate income level, right? Most of the jobs are at the low, very low levels. So I think that's important to put into perspective. I understand why we're pursuing moderate because of the fact of how state bonus density law interacts and all those things. But I think it's important to put that into context along with the fact that the reality is we have only produced 13 moderate income units through this program over now two years. between two arena cycles now, not full arena cycles on either end, but still, that's a lot. So that's where I'm at, and I appreciate all of the time of staff. I know this is a lot of deep, detailed work, so thank you all so much for your work on this.

So I know staff needs clear feedback to take to council, so I'm wondering if it would be helpful if we nicely ask Commissioner Wiscombe to restate her feedback and had other commissioners say whether or not they agreed with her feedback. Would that be helpful, or is there a different format that would be helpful for feedback?

I think that would be great. Do you have any thoughts, Teva?

I'm just, I think we would like a motion that we recommend to council that you move this forward to the council, but with whatever changes you would like them to consider, if any.

Lucille, you haven't spoken. I have not. Do you want me to make comments and then the motion? If you're willing, yes. Okay. Well, I think, first of all, we have to realize the goal here is we want to develop moderate deed-restricted units in the city. The lowering the fee for that, I think, deprioritizes the on-site deed-restricted units. And down to the point of the units becoming 583, let's call it 584,000 per unit to deposit in the local housing trust fund, I think we all realize that's really low. And that's going to catapult, I think, a lot of money going into the trust fund. But keep in mind, they don't deal in moderate units. They deal in the other low, very low. And I think to Vice Chair DiLuccio's point, the fractional units are going to bring in money. And the other thing we need to realize is that Right now, developers don't have the option of an offset fee. And this gives them another option, and I think that's important. It's what they've been asking for for years, and it gives them another option. And I'm not doing a very good job of doing these. And to another point, there's a reduction in market value that I think the developer needs to consider by developing a deed restricted unit. So if we want, if they decide not to develop it, at least a higher amount of money is going into the local housing trust fund that's more realistic to what it costs to build a unit. I think, so with those things being said and the adding to the definition section the net livable area and perhaps some calculations like you showed us that would be, you know, maybe we could add those to the definition, that would be great. And having the verbiage offset fee, not fee out. And also the recommendation that we have a, worksheet developed for applicants and developers that clearly explains all their options because there are quite a few options here. With those, I would make this motion.

I'll second that motion.

Do we need to read the motion?

Can the Planning Commission Secretary read back what she understands the motion to be?

So I understand the motion to include an abridged version of what's on the screen recommending to City Council and also the what had been originally displayed on the side about clarifying the floor area used in fee calculations if that's correct and then Commissioner Wiscombe's comments regarding the expanding the definition sections with the net livable area, adding calculations, verbiage for the offset fee instead of fee out, a recommendation for a worksheet for applicants, which I will expand on this when I review the recording. And additionally, I didn't capture your beginning comments, which I will capture in the recording because I wasn't sure where you went into the summary. But I will get everything you said.

Sorry, Jasper. Okay. And it's actually net livable floor area. Yeah. I think that's what we want to be consistent. So if we have examples of Calculation examples that show net livable floor area, we want that in the definition, which doesn't exist there right now.

Did the motion include CEQA and consistency with general plan and city charter as well? Yes, yes.

So item B of the recommendation to forward to city council and item C. Second, second, second.

further discussion, especially if there's further discussion around the exact fees around G2. Commissioner Barnwell.

Before it's lost, I think before it's lost, the council needs to know that we think there's so much more that needs to be done on this whole concept, including what Commissioner Wardlow said, which is our own city-owned land and designating whatever kind of people we want to rent those units. But I think whatever we do with the council, we need to carry forward the idea that this is just the tip of the iceberg as far as we're concerned.

Commissioner Peterson.

The only thing I would add is in our tables that we had, there was spread of in-lieu fees by methodology, and I would support the $73 that Commissioner Wardlow suggested. based on that, but I understand if the majority isn't there. This would be for the G2 fee out 100%.

Can I just get a little for rental? Can I get some clarification on that? I believe Commissioner Wardlow mentioned it just for the Central Business District. Yes. You agree with that? Okay.

I think it was $72. That was what's in the report, $72.

The upper bracket was $73 in the construction cost. I was trying to go off of what is the actual construction cost. That was what was in the chart.

If that's a request to amend the motion, I think... Are you requesting to amend it?

Oh, well, yeah, I guess we're talking about the motion. Sure, well... That's where my vote is, but I'm willing to go with where the majority is. In the business district, right? Yes. Well, that's what you said, right?

Yeah, I made the motion. My comments were focused on the business district. I am open to hearing others' perspectives, but that's where I'm at.

So I'm going to quickly look to city attorney, because I think we have competing motions. Do we need to vote on one to move to the next?

Chair Boss, I don't think there was another motion. I think it was just a request to amend the motion on the floor.

Okay. Yeah. And so now it would theoretically be discussion on the amendment. We could vote on the amendment and then vote on the motion.

Wait. Sorry. Point of order. So if you'd like to make a substitute motion that would add that, then that would be what we do. If we're just discussing your proposal that Commissioner Wiscombe add that to the motion, then we can have that discussion. And if Commissioner Wiscombe and the seconder agree, then it could be added. If they choose not to, then we vote on it and see where we land.

Okay. So we have the motion to keep as is, but we have a request to amend it to 73. So we'll now have discussion on that request. Okay. I'm supportive of that as well.

Well, I'm supportive of that being in the business district, in the 73, but the rest of the city, we're talking about the 91, correct?

Yeah, that's what I'm talking about for this, because I think this discussion, you know, I think Commissioner Wiscombe raises a lot of good points. You know, I look forward to kind of seeing what council says. I would be open to considering it citywide, but given how this discussion has gone, I think to center it in the central business district for this purpose.

Well, if that's your intent, then that I can go for, just, you know, in the business district, but not the entire, and the balance of the city would be the $91 million.

I'd like to hear from Commissioners Bauke and Barnwell and then to the motion maker.

I support the change.

I'll go along.

What? Wow. I think it's a number that's been thrown out without any consideration other than the fact that it lowers the cost of a unit to $584,000, which is a steal. You're not gonna get any moderate units built in the central business district, I don't think. I think you're just gonna get contributions to the local housing trust fund. And where, yes, you will get affordable units built eventually from the local housing trust fund, you're not going to get the moderate units, which was the goal here of the program. And I also feel that we have not given this offset fee a chance to take it for a ride and see what it does. We talk about not getting housing downtown. There's been a ton of reasons why we haven't gotten housing downtown. And one of the reasons was we didn't have an offset fee before. And, and, uh, the developers had to build the units. They were begging to have an offset fee. So, um, I think arbitrarily lowering it is, is, um, the wrong thing to do at this point. And I, I can't, I don't know if it was a motion, but I can't support that change in the motion.

I'll look at city attorney again to your boss. So there's a motion on the floor. Um, if someone would like to propose a substitute motion, then they can do so, and then we would vote on the substitute motion first, and if it passed, then the other one would fail. If the substitute motion fails, then we'll vote on this. Point of order.

Couldn't we vote on the, since we're considering the motion on the floor, couldn't we consider an amendment to that motion, vote on that amendment, and then vote on the motion? The motion maker has to.

Am I able to, if we're still in the discussion, am I able to respond to Commissioner Wiscombe?

since we were having a discussion on the motion.

So I just want to be clear. I also am concerned that then we don't get the moderate units downtown. But again, because we only have 13 units throughout the whole city since 2019 that are hitting that moderate income, that's why I'm looking at this, is because I want more affordability, and yet just wanting that isn't happening. And when I said 73, it's not an arbitrary number. It's the number that was noted in the... in the staff report as the cost of construction, so I thought that that was an equal and fair landing point. But I hear you. I also want affordability. I am just concerned that we are not getting that affordability through the way we're currently pursuing it.

Okay. But I also feel that we haven't given developers the option to have an offset fee, and now we're giving them that option. The amount of money we're getting per unit at your $73, I think I calculated at 72, so I might be off a little bit, but $584,000 does not build a unit. And I think we all know it doesn't build a unit. I would be happy to keep the motion as it is and also to make comments to city council on a very considerable discussion we had up here about lowering that fee in the central business district. But I think that that should be studied more, and I don't think it should be an arbitrary, let's take it down to $73 a square foot.

I don't think it's an arbitrary number. It was the recommendation in the study was 71, and then the cost that is noted Actual study on what it costs to construct was 73.

So it's not that I'm making up the number Someone needs to make a substitute motion. I think that's what Benjamin did.

I'm sorry I want to go in order of folks who have requested to speak. So vice chair dilute you.

Okay. I want to make a comment We don't know what the council is going to come up with what dollar amount Okay, so that I just want to throw that out there that being said Your calculation is 580 580 $4,000 in case that'll go into the housing fund So if we give that incentive, the lower cost to put into the housing fund, when we go to use those dollars, that'll multiply. We're on it from four to maybe up to 10 times. So we can, that's another avenue in order to get us the affordable housing that we need. So I'm willing to go along with that. I'll make a substitute motion if I can. We should call for the question.

We need to first finish this discussion. Commissioner Barnwell.

I'd like to call for the question, which is vote on the motion.

The motion, which includes the 91 and 72. Correct. Then you made a substitute motion. There's not been a substitute motion at this point.

No substitute motion. The original motion, which does not include Commissioner Wardlow's changes. Can I withdraw my motion?

I second it. Can I withdraw the second to my motion?

No, you can't. There's a motion on the floor. I second that motion. Doesn't matter. She made it, too. We've got to vote on that. And then we either vote yes or no, and then we do a new motion that's... Let's do a substitute motion, please.

I'll make a substitute motion.

Okay, please make the substitute motion.

The substitute motion would be to everything that's been discussed here as part of the motion, the... The definition and all that. And also, the substitute motion would be the $73.

The $73 in the central business district. The central business district only.

And the balance of the city would be at the $91. I'll second that.

Did that motion include CEQA and consistency with general plan and city charter?

Yes. And also the definition of living areas.

Understood.

Yes.

Mm-hmm.

Ms. Carman, can we please have a roll call vote on the substitute motion?

Thank you. I'll begin with Commissioner Wiscombe. No. Commissioner Barnwell. Yes. Commissioner Peterson.

Yes.

Commissioner Bauke.

No.

Commissioner Wardlow. Yes. Vice Chair DiLuccio. Yes. And Chair Boss.

Yes.

And I should take comments for the no responses. So Commissioner Wiscombe. Thank you.

I'm voting no because I think that, first of all, we have never given developers an opportunity to have an offset fee, which this package gives them. I think that the $72 or $73 a square foot in the CBD, which is probably the highest cost place to develop in the city, Uh, produces a unit that's, that's below 600,000 per square foot. And, uh, I'm sorry, per, per unit, 600,000 per unit, according to our examples. And it's, it's going to create a lot of developers that come forward and, and just, uh, give, give money when staff has said our incentive is to build. some affordable units downtown some moderate rate units downtown which we won't get um the the our local affordable housing providers uh don't get the leverage from the moderate units that they get from the low and the very low income units i think it would be i would have thought it would be great to pass on to council this very fruitful discussion on lowering the rate in the Central Business District, but that we should have left it where it was.

That's all.

Thank you. And Commissioner Bauke?

Actually pretty much as you notice it went back and forth on this and I'm sort of teetering But I think Commissioner wisdom stop Ross's is where I pretty much landed at the end of this which is this is a little premature to jump to that because I think they are our goal is we're giving them a some significant ways to do this different than what we've had before. I think we should at least give it a test ride before we start lowering things. I think we do that later if we have no takers.

Thank you. Motion passes.

We're now, thank you, Ms. Carman. This action is not appealable. The next steps are just that we'll go to council, correct? Thank you. We'll close that item and move to the administrative portion of our agenda with a lot of gratitude to staff for being in this conundrum with us, and we appreciate your due diligence and time spent on study. Moving on to the administrative portion of the agenda, committee and liaison reports, beginning with the staff hearing officer report.

I have a brief one. I was actually in person yesterday because I met with staff on the other item we just took up. Two things were on the agenda, 167 Vista Del Mar Drive, approval of a coastal development permit to allow for an ADU, and then 1454 Harborview Drive, approval for a coastal development permit to allow for an ADU and requires a front setback modification to allow for increased roof height. That's my report.

Thank you. Any other committee liaison reports? Okay. Move on to discussion on subcommittees and workshops. I think as a result of this item discussion and past meetings. We had a good discussion with council about downtown density and I understand that we'll be reconvening to talk about city-owned land, but are there other items that we would like to add to this list? Okay, then it is now 3.47 p.m. That concludes our August 20th Planning Commission hearing. Our next meeting is tentatively scheduled for Thursday, September 3rd. Thank you.