Council Special Meeting

MINUTES CITY COUNCIL SPECIAL MEETING CITY OF MONTEREY Wednesday, January 29, 2020 4:00 PM COUNCIL CHAMBER MONTEREY, CALIFORNIA Councilmembers Present: Albert, Haffa, Smith, Williamson, Roberson Absent: None City Staff City Manager, Assistant City Manager, City Attorney, Community Present: Development Director, Acting City Clerk, Dir. of Information Resources/City Clerk, Principal Planner, Associate Planner, Administrative Analyst (Housing), Administrative Assistant (Planning) CALL TO ORDER Mayor Roberson called the meeting to order at 4:06 p.m. STUDY SESSION 1. Receive Presentation on Inclusionary Housing Issues and Opportunities (Not a project under CEQA Article 20, Section 15378 and under General Rule Article 5, Section 15061) Action: Received presentation, Received public comment, Discussed Community Development Director Cole provided an overview of the City's inclusionary housing policy, its history, and relevant State law. David Zehnder and Kate O'Beirne, Economic & Planning Systems, Inc., gave the presentation covering topics including the City's current inclusionary housing requirements, existing housing supply and trends, development economics and feasibility, policy objectives and potential incentives, and potential changes to City's inclusionary housing ordinance. Mr. Zehnder and Ms. O'Beirne answered Councilmembers' questions. Community Development Director Cole gave a brief overview of the City's affordable housing inventory and said that if Council wishes to amend the inclusionary ordinance, a study will need to be done. The Council discussed the matter. The issue of parking was discussed. The question was posed whether reducing the inclusionary percentage from the current 20% down to the 15% State minimum could allow for greater development in Monterey. It was stated that more reasonable, appropriate housing units are desired. It was requested to have a better understanding of a developer's profit, and return on investment/cap rate, at various levels of inclusionary housing. It was stated that the City would benefit from better understanding the value of water credits relative to affordable housing. It was stated that more information is desired on the subject of the City's fees and permits if waived, and how it would affect the City and development. It was stated that lowering the inclusionary percentage may just result in losing inclusionary units without providing a benefit, and it was requested to have a fuller understanding of how various inclusionary percentages affect development possibilities. It was stated that the State's legislative findings around inclusionary percentages would be valuable information for the City Council to review. City Council Minutes January 29, 2020 Mayor Roberson opened public comments. Peter Silva, Architectural Review Committee, recommended that the City offer a baseline of 15% inclusionary housing with a planned development overlay district as an incentive so developers can modify zoning standards, and 20% inclusionary housing with an associated density bonus as an incentive. Robert Abbott, a developer of the 2200 North Fremont Street project, suggested that the City increase the level of allowable staff discretion in approving density bonuses, and said that a scaleable property tax abatement program over a period of time could help take the up front risk out of a deal for developers. Nelson Vega suggested perceiving the inclusionary percentage as a tax that must be subsidized by other units, and suggested the City require zero inclusionary units, stating that the marketplace would incentivize land development by density. Esther Malkin, Monterey resident and renter, questioned the rent averages provided by EPS, referred to a Statewide trend of vacancies and residents leaving the State, said that Silverie Partners is able to pencil out development projects with inclusionary housing, and encouraged the City to continue looking at its own properties for housing purposes. Jean Rasch, Monterey resident, spoke against in lieu fees, stating they allow an inbalance of where housing is placed, and recommended reading more about the large scale purchase of properties during the 2007-08 housing crisis as outlined in the book Homewreckers. Dan Silverie, Silverie Partners, used his current Franklin Street project as an example of how rent spreads out in a development project, and said that it can help a developer to have a few more moderate income units to balance with very low income units. He said that banks offer special interest deals for developers. Vanessa Diffenbaugh, MidPen Housing, said that multi-family affordable housing would be the solution for the loss of enrollment in the school districts, and that 14% of children in the Monterey Peninsula Unified School District have qualified for homeless services. She said that State tax credits are being provided for Highest Resource Communities, for which she said Monterey qualifies. Scott Dick, Monterey County Association of Realtors, spoke in favor of using median numbers rather than averages, suggested working with partners to exempt fees on accessory dwelling units (ADUs) or median and low income housing, and suggested that it is time to stop thinking about separate homes and everyone having a car. Doug Roberts, JHW Architects, said that on the 2600 Garden Road project, water is the primary limitation to increasing the total units. He suggested a second phase, in the event of future water, which could get through approvals quickly, which he said might require an in lieu fee for moving some of the open space to a different site, and could possibly reduce parking. Bob Winkel-Black, local building contractor, suggested the City lower its inclusionary requirement to the State-mandated 15% and suggested that the City allow its staff to have parameters for setback, coverage, floor area ratio, and parking requirements. Mayor Roberson closed public comments. The Council took up the matter for discussion. It was stated that the mix of units is important and should be considered in an inclusionary housing ordinance. Family units were mentioned as a specific need, and it was stated that lower-income affordable housing is associated with more children in a school district. A potential vacancy tax, and what might it look like, was discussed. It was stated that the City should at least match the State's density bonus, and that increased density is cheaper for development and also cheaper for renting. It was suggested to increase smaller, more affordable, environmentally friendly units. It was stated that reducing parking requirements should be part of the solution. It was suggested that staff could make the density judgment calls in order to allow projects to move forward more quickly and save 2  City Council Minutes January 29, 2020 funding. It was suggested to put potential connection fees to regional bodies and ask that the public engage in those discussions. On question, Community Development Director Cole confirmed that 35% density bonuses are required by the State, but stated that the City may want to look at a higher percentage, and if so, asked the Council to determine the criteria. It was stated that a vacancy tax could help with revenue for affordable housing, and voters won't object. It was requested to receive further information about the impact to general fund associated with increasing fees, and it was stressed that if fees were adjusted it should be in a programatic, fair way instead of case-by-case. The benefit to lowering the inclusionary requirement was questioned and it was stated that there should be hard data associated with this decision, and that any loss of affordable units would take the idea off the table. It was stated that in lieu fees don't make a lot of sense. It was stated that parking solutions would be welcome and that any density above 35% would have to be in exchange for additional affordable units above the 20% inclusionary requirement. It was recommended to define affordable based on bedrooms instead of units. It was stated that one size fits all doesn't work because neighborhoods are different from others. Neighborhoods with higher density and parking issues were cited and it was stated that the City should be looking for quality, balance, and appropriateness so as not to over-densify the community. It was requested to learn more from the economists about the impacts on development between the 15% and 20% inclusionary requirements, and whether any additional housing could be created at any of those levels. It was requested to consider and learn more about the potential impacts of a hybrid approach that could have different inclusionary requirements for different sized units. ADJOURNMENT The Council adjourned at 5:59 p.m. Respectfully Submitted, Approved, Clementine Bonner Klein Clyde Roberson Acting City Clerk Mayor 3