CC 07-16-2024 Item No. 10. Vallco Rise SB 35 Project BMR and Planning Fee Waiver _Supplemental Report
CITY COUNCIL STAFF REPORT
SUPPLEMENTAL 1
Meeting: July 16, 2023
Subject
Waiver of Below Market Rate Housing Mitigation Fees (“BMR Fees”) and
Zoning/Planning Municipal Code Fees (“Planning Fees”) imposed on Vallco/Rise SB 35
project (10101-10330 North Wolfe Road).
Recommended Action
Adopt Resolution No. 24-077 waiving BMR and Planning Fees imposed of the Vallco/Rise
SB 35 project.
Supplemental Report
A corrected draft resolution is provided with this Supplement Report (Attachment C).
Staff’s responses to questions received from councilmembers are shown in italics.
Q1: A common question from residents is "What's the total amount of fee waived?" I
found two figures mentioned in the staff report: $70M in one place and then $42.8M in
another place: The staff report first states "requesting a waiver of the BMR and Planning
Fees imposed on the Project. ... The fees waived would be substantial (totaling
approximately $77 million, as calculated under the FY 2024-25 fee schedule)." Then
under Fiscal Impact, the report states "The total revenue from impact fees, benefit
payments, and reimbursement of City expenses under the Settlement Agreement would
be $42.8 million based on the current project, subject to changes to future fee schedules
and adjustments for inflation. The City would forego the possibility of obtaining
revenue from disputed BMR and Planning Fees." (Councilmember Chao)
Q1A: What exactly are the amounts waived for the BMR fee and the planning fee?
(Councilmember Chao)
A: The BMR fee would be approximately $67 million based on the FY 2024-25 fee schedule. The
“Planning Fee” would be approximately $10 million based on the FY 2024-25 fee schedule. These
amounts do not necessarily reflect amounts that the City could lawfully collect from the
developer.
Q1B: How are the amounts calculated? (Councilmember Chao)
A: The fees are calculated based on the FY 2024-25 fee schedule.
Q2: Resident RF asks "We know that the Vallco project will create a demand for more
housing – this was even in a staff report – so why would we give up BMR fees?"
(Councilmember Chao)
A: This statement is incorrect. Please refer to the staff report and draft resolution. Based on the
City’s 2015 Non-Residential Jobs-Housing Nexus Analysis, the project fully mitigates its
induced demand for affordable housing.
Q2A: What's the percentage of BMR units, compared with total units in the Second
Revised project? What's the amount of office space and retail space in the Second
Revised Project? (Councilmember Chao)
A: This question is not material to the agenda item.
Q3: Resident RF asks "If Vallco is successful in waiving its BMR fees, then what does that
mean for other projects in the City?" Will this set a precedent so other projects would
also challenge BMR fees? (Councilmember Chao)
A: Like jurisdictions throughout the county, the City is mindful of the potential impact of Sheetz
v. County of El Dorado (2024) 601 U.S. 267 on the City’s ability to assess impact fees on
development projects, as well as of the perception created by granting a fee waiver for any specific
project. Formally, speaking, however, the City Council’s decision does not have precedential
value, and as a practical matter, the unique characteristics of this project —a large, mixed-use
project with a high percentage of affordable units—renders this project distinguishable from
future applications that the City could reasonably anticipate receiving.
Q4: Resident RF wrote "Cupertino needs assurance that the BMR housing will be built
timely – we have already experienced a bait and switch at Main St. with Senior Housing
- please be smart and get the BMR housing built first." (Councilmember Chao)
Q4A: Do we have any assurance in the approved Second Revised project that the BMR
portion will be built first? (Councilmember Chao)
A: The conditions of approval for the modified project require concurrent construction of BMR
housing with other phases of the project. Those conditions of approval are not affected by the
settlement agreement or requested fee waiver and are not agendized for discussion .
Q4B: Can we revise the ordinance so that the BMR fee is waived only after the
occupancy permit is pulled for the BMR portion of the project? (Councilmember Chao)
A: The BMR fee is set by resolution. The BMR fee waiver is being requested as a condition of a
settlement agreement that will result in significant payments to the City as the project is built. In
the absence of a settlement agreement—and even assuming the BMR fee could ever be collected—
the time frame for payment of any BMR fees to the City would be highly uncertain and likely
deferred for many years, given that the fee payments would largely be tied to office construction.
Q5: Resident RF wrote "please hold the BMR funds in escrow until such time that the
BMR housing is built." Why do we need to waive the BMR fees now? (Councilmember
Chao)
A: Please see the response to Question 4B, above. There are no funds to be held in escrow.
Q5A: What if the BMR portion of the project is not built due to the lack of funding or
whatever reason, would the waiver of BMR/planning fees still apply? (Councilmember
Chao)
A: Please see the response to Question 4A, above. Also refer to Exhibit D, Part II of the
Settlement Agreement and Release, which addresses project modifications.
Q5B: What if Vallco submits a third amendment to change the project again? Would the
waiver of BMR/planning fees still apply? (Councilmember Chao)
A: The settlement agreement would remain effective as long as the developer’s current SB 35
entitlement remains in place, up to a maximum term of 20 years.
Q5C: What if the property is sold to another property owner who modified the project
again? Would the waiver of BMR/planning fees still apply? (Councilmember Chao)
A: Yes. The agreement is binding on the developer’s successors in interest.
Q6: The staff report states "VPO will pay a TIF calculated based on the per trip fee in the
City’s fee schedule in place at the time the fee is due (totaling $10.3 million for the
Project under the FY 2024-25 fee schedule)." But there is no amount listed under the
Fiscal Impact section to state the fiscal impact of the settlement agreement.
(Councilmember Chao)
A: The value of the settlement agreement to the City is stated in the fiscal impact section.
Q6A: Will there be any upcoming agenda item to execute this portion of the settlement
agreement? (Councilmember Chao)
A: No. The City Council authorized the City Attorney to negotiate and execute the agreement at
its June 19, 2024 closed session. The settlement agreement was executed by the parties on July 10,
2024.
Q6B: What's the fiscal impact of the TIF portion of the agreement? Meaning what is the
normal amount of the TIF fee? How is it calculated, if there is no settlement agreement?
(Councilmember Chao)
A: The TIF fee was calculated based on the City’s current fee schedule and recommendations
developed by the Institute of Transportations Engineers (ITE) in consultation with the
Department of Public Works, based on the number of trips expected to be generated by the
project.
Q6C: When is the fee of $10.3M due? (Councilmember Chao)
A: The TIF would be paid at the time of issuance of a building permit or certificate of occupancy
for each phase of the project, after credits for trips generated by the former mall are exhausted.
Q6D: Would this set a precedence for other projects to receive waiver? (Councilmember
Chao)
A: See the response to Question 3, above.
Q7: The staff report states "VPO will dedicate public parkland and provide private open
space with amenities consistent with the requirements of Municipal Code Chapter 13.08,
and will in exchange receive credit against the full amount of the Parkland Dedic ation
Fee due." (Councilmember Chao)
Q7A: Will there be any upcoming agenda item to execute this portion of the settlement
agreement? (Councilmember Chao)
A: No. As the approval authority for the SB 35 project, the Director of Community Development
approves dedication of parkland and credit for private open space pursuant to Municipal Code
sections 13.08.040 and 13.08.080.
Q7B: What's the fiscal impact of the parkland dedication fee portion of the settlement
agreement? What is that calculated, if there is no settlement agreement?
(Councilmember Chao)
A: In the absence of any credits, the Parkland Dedication Fee for the project would be $54,000 per
market-rate dwelling unit. However, that amount would be subject to mandatory reductions for
qualifying private open space and reasonableness and constitutional constraints on the Director
of Community Development’s decision to accept, or not accept, parkland for dedication. The
settlement agreement provides for a global resolution of all fee disputes, which avoids, among
other things, litigating the constraints on the City’s ability to charge the developer all or part of
the Parkland Dedication Fee.
Q7C: How much public parkland and private open space is there to receive "full credit
against the full amount of the Parkland Dedication Fee due."
A: Approximately 9.61 acres.
Q7D: What is typically allowed for other projects? Would this set a precedence for other
projects to receive waiver? (Councilmember Chao)
A: Parkland dedication has been allowed for other projects. As noted above, the decision with
respect to this project would not have a binding, precedential effect on future City decisions,
although staff is certainly mindful of the perception created by individual decisions.
Q8: Staff report states "In Sheetz, Supreme Court held that a generally applicable,
legislatively imposed fee charged as a condition of granting a land use permit must have
an “essential nexus” to the government’s land use interest and “rough proportionality”
to the development’s impact on that interest to avoid a finding that the fee is a taking of
property in violation of the 5th and 14th Amendments of the U.S. Constitution."
(Councilmember Chao)
Q8A: Has the city done a nexus study before determining the current BMR impact fee?
TIF? Parkland dedication fee? Planning fee? (Councilmember Chao)
A: Yes. Please refer to the response to Question 2, above, as well as the draft resolution submitted
with the staff report.
Q8B: Does the city recover the full impact as analyzed by the nexus study?
(Councilmember Chao)
A: Please refer to the response to Question 2, above, as well as the draft resolution submitted with
the staff report.
Q9: How much has the city spent on consultant fees due to the challenge of impact fees?
Is the city compensated for the consultant fees and city staff time spent due to this
challenge? (Councilmember Chao)
A: This question is not material to the agenda item.
Q9A: Could the city adopt an ordinance to recover consultant fees and city staff time
for any future challenge of city fees? Since this is a fee that the city would not have to
bear unless an applicant challenge the fees. (Councilmember Chao)
A: This question is not material to the agenda item.
Q10: For the planning fee waived, would the project still apply for permits and any
other planning services? If so, the city will then subsidize all fees for the project,
regardless of the extent of the effort needed? (Councilmember Chao)
A: The settlement agreement provides that the developer will pay all fees identified in the City’s
current fee schedule other than those specifically addressed in the agreement.
Q10A: Would there be an item in the budget report for such subsidized/waived fees in
the annual financial report or any relevant report? (Councilmember Chao)
A: Please refer to Exhibit F of the Settlement Agreement and Release, which provides a template
of the annual report required under the agreement.
Q11: Resident RF asked "For the fees to be paid, please itemize. Are these fees based on
the old fees or the current fee structure. If it is based on the old fees, please also list how
much the fee would have been based on current fee structures for the sake of
transparency." (Councilmember Chao)
A: See the response to Question 1B, above. An itemization of all fees to be paid by the project is
outside the scope of this agenda item and is in any event not possible to calculate at this time.
Q12: Resident RF asked "Please explain why Planning Fees are being waived. What are
the Planning Fee costs of this project?" (Councilmember Chao)
A: Please refer to the staff report, the attached resolution, and the response to Question 1A, above.
Q12A: Does the resolution include waiving the planning fees, such as “plan review and
inspections”? Does that mean the city won't recover any cost for any plan review and
inspect for any permit for any phase of the Rise project?
A: No. Please refer to the response to Question 10, above.
Q13: Resident RF asked: “The agenda shows that the reports were created way back in
May. Why did it take so long for this to get on the agenda?” (Councilmember Chao)
A: It is unclear what “reports” this question is referencing. The settlement agreement was
executed on July 10. This agenda item is being heard six days later, on July 16.
_____________________________________
Prepared by: Christopher D. Jensen, City Attorney
Approved for Submission by: Pamela Wu, City Manager
C – Draft Resolution