PURPOSE:

This report provides the City Council with the opportunity to review the annual adjustment to the development impact fee schedule and serves as an update on the status of the development impact fee nexus study currently being conducted.

BACKGROUND:

In March 1993, the City Council adopted the Development Impact Fee Ordinance (No.3340-Chapter 31, Article 22 of the Burbank Municipal Code).  The Ordinance was created to ensure that the growth needed to support a vital economy would not jeopardize the quality of the community�s services.  An �Infrastructure Blueprint for the 21^st Century� was developed, combining an infrastructure improvement package with a strategy to promote economic development.  This program established funding for improvements, including Transportation, Libraries, Parks, Police, and Fire services, through the use of development impact fees imposed on new developments. 

The Development Impact Fee Ordinance requires that the fees be adjusted annually by �a percentage equal to the inflation rate for the prior year for construction costs as determined by the Building Official on December 1 of each calendar year.�  Since adoption of the Ordinance, this fee adjustment has been based solely on the Construction Cost Index.  However, during the December 2002 annual adjustment, staff indicated to Council, that a nexus study would be conducted to review and update the existing fee structure to reflect current economic and growth projections (non-transportation)[1]. 

To properly assess development impact fees, a reasonable connection, or nexus, must exist between new development and the anticipated improvements to city facilities and services required to support that development.  As a result, a nexus study is required to review and revise the fee structure.  Council approved the study request in September 2003, and since that time staff has been working to finalize the Capital Improvement Program (CIP), which defines the projects to which the fees apply.  In addition to this, land use projections and densities, as well as service level standards are also being studied.  This combination of anticipated future construction, coupled with the projected densities of those uses, provides the City with a forecast of future growth, and based on current trends, how that growth will impact existing City facilities.  The CIP represents the City�s effort to offset any impact attributable to new development by providing a funding source through the fee structure.

Future phases of the study will include finalizing new fee levels and analyzing those fees by conducting a cost burden analysis to ensure that the market will support a new fee structure without negatively effecting development activity.  When these tasks are completed, staff will solicit input from the public and the development community.  On October 16, 2003, during the first public/stakeholder meeting, developers provided insight to the potential effects on development. A second meeting is expected to prove equally beneficial.  A Planning Board hearing is anticipated for February 2004 and in March 2004, the City Council will review and consider adoption of the revised fee structure.

ANALYSIS:

Although the development impact fee adjustment proposed this evening will be re-evaluated in early 2004, after completion of the nexus study, the BMC mandates that these fees be adjusted at this time.

The Development Impact Fee Ordinance requires the fees (transportation and community facility) to be automatically adjusted to keep pace with changing construction costs.  The guidelines for determining the construction cost rate adjustment are established by the Engineering News Record Construction Cost Index.  Although this adjustment is automatic, the Ordinance also grants the City Council the authority to revise the fee adjustment by making the adjustment either greater or less than required by the Cost Index factor.

The November 3, 2003 Engineering News Record has a Cost of Construction Index reflecting a 3.3% increase in the Los Angeles area (Exhibit A).  Therefore, staff intends to increase the existing fee schedule for both the transportation and community facility fees by 3.3%.  

FISCAL IMPACT:

The fees will increase effective January 16, 2004, thirty-one days after adoption.  Development Impact Fees are dependent on new construction activity, and assuming construction in 2004 keeps pace with the past year, this action may result in an increase in development impact fee revenues for the calendar year 2004.

RECOMMENDATION:

Staff recommends that the City Council note and file this report.

EXHIBITS:

A.        Engineering News Record, November 3, 2003

Certificate of Adjustment

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