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16 of 19 <br /> <br />economy, and even small increases in the inclusionary rate or fee may be difficult to <br />support. <br /> <br />Development Feasibility Analysis <br />It is important to consider the effect of City-imposed fees on development feasibility, and <br />particularly whether fees will create an impediment to development that could limit <br />housing production, discourage new commercial investment that supports job creation, <br />and limit development that can contribute to a sustainable and growing sales tax and <br />property tax base. <br /> <br />To evaluate this question, EPS conducted an initial feasibility assessment for various <br />types of development, using three different benchmarks or indicators: <br /> <br />1. An evaluation of the costs to develop residential units, versus the market-rate <br />sales price/rental cost of units in a project. <br /> <br />2. An evaluation of typical rates of return for ownership and rental projects and the <br />effects that increased inclusionary requirements and/or fees might have on those <br />returns. <br /> <br />3. A comparative analysis of impact fees charged in Pleasanton, versus peer <br />communities – both as a dollar amount, and as a percentage of project value. <br /> <br />Note that the analysis focuses most heavily on residential development, since <br />development costs tied to inclusionary requirements are a significant factor in this <br />workshop’s discussion. However, for reference, data has been provided for a typical <br />non-residential (office) project, so a similar evaluation can be made for commercial <br />uses. <br /> <br />The analysis was based on generalized assumptions that reflect typical or average <br />conditions; in reality, every project is different in terms of site improvement and <br />acquisition cost, development costs, achievable rents / prices, and other factors. The <br />results of this analysis are summarized below: <br /> <br />Indicator 1: Evaluation of Cost to Develop versus Market-Rate Sales Price/Rental Cost <br />This indicator helps to define the potential capacity for market-rate development to <br />absorb additional costs in the form of increased impact fees or inclusionary <br />requirements, by calculating the cost to develop or build a unit, versus the sales or <br />rental price.6 <br /> <br />For residential development, the analysis indicates there is some capacity to increase <br />overall fee burden for ownership products, particularly detached single-family homes <br />and townhomes. Based on the assumed cost inputs, for single-family homes, there is <br />estimated capacity for fees or other development costs to be increased in the range of <br />$215,000 per unit; for townhomes, approximately $96,000 per unit; and condos <br />approximately $88,000 per unit. It is important to note that these figures provide broad <br /> <br />6 Includes costs such as land, construction, soft costs, and fees, including regional connection fees, such as those <br />levied by PUSD, Zone 7 and DSRSD, at the rates reflected in those agencies’ Master Fee Schedules.