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CC 01-19-2021 Item No. 06 Transportation Impact Fee Study Postponement_Written CommunicationsCC 01-19-21 #6 Postponement, Transportation Impact Fee Nexus Study Update Written Comments 1 Cyrah Caburian From:Olson, Donna <Donna.Olson@berliner.com> Sent:Tuesday, December 22, 2020 12:53 PM To:City Council; Cupertino City Manager's Office Cc:mtersini@aol.com; Faber, Andrew L.; Ramakrishnan, Erik Subject:Transportation Impact Fees Nexus Study Attachments:Cupertino Letter re TIF Fees 12.22.20 v1.pdf CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you recognize the sender and know the content is safe. City Council Members, Attached please find correspondence from Andrew L. Faber of today’s date. Donna Olson | Litigation Assistant to Andrew L. Faber Christine H. Long Eileen P. Kennedy Ghazaleh Modarresi Aleshia M. White Donna.Olson@berliner.com San Jose | Modesto | Merced 10 Almaden Blvd., Eleventh Floor | San Jose, California 95113 | 408.286.5800 | F 408.998.5388 | www.berliner.com CONFIDENTIALITY NOTICE: This message may contain information that is attorney‐client privileged, attorney work product or otherwise confidential. If you are not an intended recipient, use and disclosure of this message are prohibited. If you received this transmission in error, please notify the sender by reply e‐mail and delete the message and any attachments. Please consider the environment before printing this email. 4833-1608-7764v3 ALF\24070001 TEN ALMADEN BOULEVARD ELEVENTH FLOOR SAN JOSE, CALIFORNIA 95113-2233 TELEPHONE: (408) 286-5800 FACSIMILE: (408) 998-5388 www.berliner.com Branch Offices Merced, CA • Modesto, CA ____________ ____________ FOUNDERS SANFORD A. BERLINER (d. 2020) SAMUEL J. COHEN OF COUNSEL STEVEN L. HALLGRIMSON FRANK R. UBHAUS RALPH J. SWANSON NANCY L. BRANDT LESLIE KALIM McHUGH BRADLEY HEBERT December 22, 2020 VIA ELECTRONIC MAIL Mayor Paul & Members of the City Council City of Cupertino 10300 Torre Avenue Cupertino, CA 95014 Email: citycouncil@cupertino.org Re: Transportation Impact Fee Nexus Study, Postponed from November 17, 2020 Dear Councilmembers: I am writing on behalf of KT Properties Urban, Inc. (“KT Urban”) regarding the above- referenced matter. This letter supplements my letter dated November 16, 2020, regarding proposed increases to the City’s Transportation Impact Fee (“TIF”). That letter is attached as Exhibit A and is incorporated by reference. I also would like to draw your attention to the November 17, 2020 letter of Mr. Miles Imwalle to City Attorney Heather Minner regarding the nexus study for the proposed TIF increase (the “Imwalle Letter”). KT Urban concurs in that letter’s analysis of general deficiencies in the study. In this letter, I would like to draw your attention to four specific deficiencies in the study in addition to the deficiencies raised in my prior letter. These include the failures to: (1) demonstrate a nexus between new development and projects addressed in the study, (2) apportion project costs to new development fairly, (3) justify project costs, and (4) credit existing development. 1. Failure to Demonstrate a Nexus Between New Development and TIF Projects Included in the Nexus Study Of the total $105,919,788 in TIF project costs allocated to new development in the nexus study, $89,285,991 of these costs, or approximately 85 percent, fall into three categories, ANDREW L. FABER PEGGY L. SPRINGGAY SAMUEL L. FARB JAMES P. CASHMAN STEVEN J. CASAD NANCY J. JOHNSON JEROLD A. REITON JONATHAN D. WOLF KATHLEEN K. SIPLE KEVIN F. KELLEY MARK MAKIEWICZ JOLIE HOUSTON BRIAN L. SHETLER HARRY A. LOPEZ CHARLES W. VOLPE CHRISTINE H. LONG AARON M. VALENTI CHRISTIAN E. PICONE SUSAN E. BISHOP SANDRA G. SEPÚLVEDA MICHAEL B. IJAMS KIMBERLY G. FLORES DAWN C. SWEATT TYLER A. SHEWEY JAMES F. LANDRUM, JR. C. DAVID SPENCE JOSHUA BORGER THOMAS P. MURPHY ALESHIA M. WHITE EILEEN P. KENNEDY MICHAEL J. CHENG ALEXANDRIA N. NGUYEN GHAZALEH MODARRESI ANDREW J. DIGNAN ERIK RAMAKRISHNAN LEILA N. SOCKOLOV BEAU C. CORREIA TIMOTHY K. BOONE ANGELA HOFFMAN SHAW DAVID A. BELLUMORI BENJAMIN M. JOHNSON MARY T. NGUYEN STEPHEN C. SCORDELIS ELLEN M. TAYLOR BRANDON L. REBBOAH LINDSAY I. HOVER CHRISTIAN SIMON MARISA J. MARTINSON MARIA I. PALOMARES Cupertino Mayor and Council December 22, 2020 -2- 4833-1608-7764v3 ALF\24070001 including bicycle projects, traffic calming projects, and the transit center project discussed in my prior letter. For these categories, 50.2 percent of total costs are allocated to new development. This 50.2 percent allocation is unjustified for reasons explained in the next section. As a threshold matter, however, the nexus study fails to explain adequately why these projects are necessitated by new development at all. This is a material deficiency with the study because the Mitigation Fee Act (“MFA”) requires that in establishing impact mitigation fees applicable to new development, a public agency is required not only to identify the facilities to be constructed using revenues from the fee, but also to show a reasonable relationship between the need for the facilities and the project or broad category of projects against which the fee will be imposed.1 The nexus study offers no explanation of how the planned transit center relates to new development. On the contrary, it appears the transit center represents an existing service need. Regarding traffic calming, there is no indication that the traffic calming projects planned will be constructed in areas of anticipated growth. Finally, the study states that sidewalk and bicycle projects relate to new development due to the need to encourage transportation mode shifts to avoid overtaxing roadway systems. This statement is not supported, and appears disingenuous, especially with respect to bicycle improvements. The bicycle improvements included in the nexus study derive from the City’s 2016 Bicycle Master Plan (the “BMP”). As noted on Page 2-1 of the BMP, between 2009 and 2014, 3.9 percent of all traffic accidents in Cupertino involved bicycles, even though bicycle trips represented a 0.7 percent mode share of all trips within the City. These facts illustrate existing safety concerns, which the projects described in the BMP are intended to address. In other words, the bicycle projects described in the BMP and included in the nexus study are intended to address existing deficiencies rather than deficiencies created by new development. This violates the MFA, which states at Government Code Section 66001(g) that mitigation impact fees shall not include costs attributable to existing deficiencies. Because the nexus study fails to demonstrate a reasonable relationship between the facilities to be funded by the TIF and the need for those facilities created by new development projects, it does not satisfy the threshold requirements of the MFA. Even if such a nexus were shown, for reasons stated in the next section, the study fails to apportion project costs to new development in an equitable manner, as is also required under the MFA. 2. Failure to Apportion Project Costs to New Development Fairly In addition to requiring some reasonable relationship between new development and projects to be funded with impact fees, the MFA requires that in calculating impact fees, the costs of those projects must be equitably apportioned to new development. Based on the nexus study, the proposed TIF increase does not satisfy this requirement for any of the improvements to be funded with the fee. An equitable apportionment requires an analysis of the trips generated 1 Gov. Code, § 66001, subd. (a). Cupertino Mayor and Council December 22, 2020 -3- 4833-1608-7764v3 ALF\24070001 by new development and the cost to construct facilities to accommodate those specific trips.2 This concept is illustrated in the United States Supreme Court’s decision in Dolan v. City of Tigard.3 There, a property owner was required to build a public multiuse trail across her property as a condition of developing a store. The city justified the requirement on the ground that trips by shoppers and employees to her store would increase traffic congestion, and the trail would provide an alternate means to commute to the store. This argument was insufficient to justify the requirement to construct the trail, however, because the city failed to demonstrate that the requirement was roughly proportional to the impact of the store on local traffic congestion. Similarly, here the City has failed to demonstrate the extent to which the facilities to be constructed by the proposed TIF are needed to offset the additional traffic that new development will add to the City’s transportation network. Instead, the nexus study apportions all trips originating or ending in Cupertino to new development, without regard to the proportion of those trips that will actually be caused by new development. In the case of certain improvements, including traffic calming and bicycle improvements and the proposed transit center, the nexus study uses a citywide average of 50.2 non-passthrough trips as the basis of the allocation. It is not credible that more than half of the cost of these facilities is attributable to new development. As indicated in Table 2 on Page 7 of the nexus study, the City’s General Plan Travel Demand Model predicts an increase in housing units in the City between 2014 and 2040 of only 1,822 over the 21,412 units that already existed in 2014. This increase does not reflect a more than 50 percent growth in the demand for transportation-related facilities in the City. Therefore, the nexus study fails to apportion the cost of facilities to be funded by the proposed TIF equitably to new development, in violation of the MFA. 3. Failure to Justify Project Costs In addition to the deficiencies listed above, the project costs described in the nexus study are not justified. My November 16 letter describes the lack of justification for the costs allocated to the proposed transit center, but costs associated with proposed bicycle improvements also are not supported by the evidence set forth in the study. For example, as noted in the Imwalle Letter, the nexus study estimates the cost of the proposed I-280 channel bikeway at $45.3 million, even though the BMP estimated the cost at $2,293,000. No explanation is provided for this increase in estimated cost. 2 Cf. SummerHill Winchester LLC v. Campbell Union Sch. Dist. (2018) 30 Cal.App.5th 545, 553 (explaining, by analogy, that in calculating residential school impact fees, a district must determine the number of housing units planned to be constructed in the district, the anticipated student generation associated with such units, and the cost to construct facilities to serve those students). 3 Dolan v. City of Tigard (1994) 512 U.S. 374. Dolan dealt with an ad hoc exaction. The essential nexus and rough proportionality standard required by that case does not apply strictly on a case-by-case basis to legislative fees like the TIF. (See San Remo Hotel v. City & County of SF (2002) 27 Cal.4th 643, 671 (“San Remo”.) However, in enacting the MFA, the Legislature codified Dolan’s standard (Ehrlich v. City of Culver City (1996) 12 Cal.4th 854, 866-867), and it is necessary under the MFA to show a reasonable relationship between projects to be funded by legislative fees and the impacts of the classes of development to which those fees will apply (San Remo, at p. 671). Cupertino Mayor and Council December 22, 2020 -4- 4833-1608-7764v3 ALF\24070001 Similarly, the nexus study estimates the cost of a Highway 85 grade separated crossing study for a crossing at Grand Avenue and Mary Avenue to be $20 million, even though the BMP estimated the cost of the study at $300,000. Another grade separated crossing study for Carmen Road at Stevens Creek Boulevard is estimated at over $4 million, even though $300,000 was included in the BMP. A grade separated crossing study for the UPRR crossing at Hammond Snyder Loop and Stevens Creek Boulevard is estimated to cost $15 million, even though only $300,000 was estimated in the BMP. Finally, striping and painting a freeway interchange at I- 280 and Wolfe Road is estimated to cost $15 million, whereas the BMP estimated a cost of only $40,000. No explanation is given for the estimates, and it seems unlikely that striping and painting and grade separated crossing studies would cost tens of millions of dollars. 4. Failure to Credit Existing Development KT Urban agrees with the Imwalle letter that fees for previously approved projects should not be increased, and that credit should be given for existing development. For example, the City recently approved KT Urban’s application to construct a mixed-use housing development project at the site of the existing Oaks Shopping Center. Although the mixed-use project will generate trips, those trips will be offset by the trips that the shopping center will no longer generate once it is demolished, so that KT Urban should be required to pay only for the net impact of its project.4 And in fact, the mixed-use project will generate fewer trips than the shopping center, so that the net effect of the project will be to help reduce traffic volumes in Cupertino. For the foregoing reasons, and for the reasons expressed in my prior letter and in the Imwalle Letter, the City has failed to justify the proposed TIF increase, particularly for redevelopment projects, and KT Urban asks that the City Council not approve a fee increase without further analysis consistent with the MFA. BERLINER COHEN, LLP ANDREW L. FABER Andy.Faber@berliner.com cc: Mark E. Tersini City Manager 4 See Warmington Old Town Assocs. v. Tustin Unif. Schl. Dist. (2002) 101 Cal.App.4th 840, 860 (holding that a school district could not rely upon a fee study estimating the impacts of new housing on the need for school facilities to justify imposing school fees on a redevelopment project involving replacement of a 56-unit apartment complex with 38 single family residences). 4833-1608-7764v3 ALF\24070001 Exhibit A November 16, 2020 Letter 4833-1608-7764v3 ALF\24070001 4833-1608-7764v3 ALF\24070001 4833-1608-7764v3 ALF\24070001