Fiscal Year 2013-2015 Special Budget Meeting

Deanna J. Santana, City Administrator Subject: Proposed FY 13-15 Proposed Policy Budget Date: April 25,2013 Page 6 scenario would apply the current 1.5% rate to the first $1M of a $3M property sale, and would apply the higher 3% tax rate to remaining $2M of a $3M property sale. It should be noted that either method would substantially increase the volatility of Real Estate Transfer Tax which is already unreliable highly fluctuating revenue stream given its dependence on the quickly changing real estate market. In turn, to forecast the amount of RETT revenues in ftiture years would be difficult. Also, an increase of the RETT could create a deterrent for those interested in purchasing residential or commercial real estate in Oakland. 7) Has the City looked into Developer Impact Fees? What is the legal nexus to implement? Development impact fees are one-time charges levied upon new development and used by local governments to fund improvements and services required to serve the development. To meet legal requirements, the amount of the fee must be determined by a formula that is consistently applied and based on a proportional distribution of costs following nexus principles. A nexus means that a direct relationship exists between the fee charged to new development and the need for those public improvements. In other words, there must be a relationship between the new development and the need for the new facilities or services being funded by the impact fee. The impact fee must also be proportional to the benefits or impacts caused by new development. Development Impact Fees have been considered in Oakland, most recently in 2009 when proposals to study such fees were solicited. At the time, the City was considering two types of fees: (1) a transportation impact fee to pay for roadway improvements, bicycle and • pedestrian improvements and transit-supportive improvements and (2) a capital facilities fees to pay for public facilities such as police and fire stations, libraries, parks and senior centers and public infrastructure such as lighting and storm drains. A full environmental impact report would have been required as part of the study. The cost to complete that work was over $750,000. With no funding identified to. complete that level of work, the effort was abandoned. It is estimated that the cost for a complete Transportation Impact Fee nexus study and implementation, assuming Oakland treats the fee as categorically exempt under CEQA, could be completed for $500,000. The variables that most impact the cost of such a study are the level of detail in the traffic analysis as they relate to known or projected growth and development patterns. The Public Works Agency is prepared to coordinate another request for proposals to complete this work should a funding mechanism be identified. It should be noted that the money to complete this study would be eligible to be reimbursed through the development impact fee, should such a fee ultimately be established. Development Impact Fees are based upon the costs of providing expansion of the City's transportation systems and related infrastructure to accommodate ftiture development. It can also be used to cover the administrative costs of managing the fee. They are not used to fund Item: City Council April 30, 2013