CITY COUNCIL AGENDA PACKET WORKSHOP

6 of 19 build inclusionary units on site may currently also propose payment of LIHF, or other forms of alternative compliance. (See note above – alternative compliance will be the subject of a future workshop). A 2015 court case (California Building Industry Association vs. City of San Jose) determined that inclusionary programs for residential developments, and associated in- lieu fees are not subject to the same nexus study requirements as are required for impact fees pursuant to AB 1600. However, California State law requires local agencies to consider the financial impact of inclusionary programs and in-lieu fees on the feasibility of residential projects. Even without this consideration, it is best practice to use a nexus study as guidance to determine the maximum fee that should be charged, and structure the fee program in light of this information. As such, the City’s 2018 nexus study established the maximum fee rates for the LIHF. Table 5 provided below summarizes the LIHF as of January 1, 2024, and for reference the 2018 maximum fee and actual fee adopted. As shown in the table, while the residential in-lieu fee was set at a rate very close to the maximum, the so-called “linkage fees” for commercial development reflect a deeply discounted rate. In deciding to set the fees well below the maximum for commercial development, the City Council recognized that charging the full amount would be prohibitive, and instead calibrated the fees to be similar to those charged at the time by the neighboring cities of Livermore and Dublin. Table 5: Lower-Income Housing Fee Rates Category 2018 Maximum Fee Rate 2018 Fee Rate Adopted Percent of Maximum 2024 Rate, reflecting CPI adjustments Single-Family (per unit>1,500 sq. ft.)* $44,930 $44,248 98.5% $52,203 Single-Family (per unit <1,500 sq. ft.)* $44,930 $43,248 96.2% $51,077 Multi-Family (per unit)* $37,358 $43,293 115% $51,077 Office (per sq. ft.) $82.56 $7.61 9.2% $8.98 Retail (per sq. ft.) $211.08 $4.56 2.1% $5.38 Industrial/Distribution (per sq.ft.) $82.56 $12.64 15.3% $14.91 Lodging (per sq. ft.) $49.69 $3.15 6.3% $3.71 * While the background information is not entirely clear, it appears that adopted fees differ slightly from the maximum fee rate stated in various agenda reports, based on slightly different assumptions around the “typical” single family and multi-family unit size, when the adopted fee was set. The fee study calculated maximum in-lieu fees between $28,431 and $75,857 per unit, for units ranging in size between 1,000 and 3,500 square feet.