SUBJECT: IN LIEU PARKING FEES

Recommendation: Direct Staff as Deemed Appropriate

Background:

In 1985 the City Council established the in-lieu fee program based upon a rate of $6000 per space with allowance for Consumer Price Index adjustment. The program has undergone several amendments and in 1994 the City Council approved the recommendation of the Downtown Enhancement Commission to set aside incentive funds to pay parking in-lieu fees that would otherwise be required for downtown projects. In-lieu funds for up to 20 parking spaces were set aside ($120,000) and criteria for distribution of the in-lieu funds was established by the City Council.

Subsequently, the City changed parking restrictions in the downtown which were approved by the Coastal Commission under Coastal Land Use Plan (LUP) Amendment No. 6. These new parking requirements allowed significant business improvement and expansion to occur with little need to use set aside funds over the last 2 1/2 years. Recent development of the downtown over this period has resulted in the City exceeding the development threshold for reduced parking standards in LUP No. 6 and all new projects are now subject to the City's standard parking requirements. The City has contributed set aside in-lieu funds for the Hennessey Tavern expansion and has received a request for payment of in-lieu fees by the Mix, a restaurant/retail business.

Analysis:

In lieu fees are intended to encourage development on sites where providing required parking would be difficult or excessively expensive. The in-lieu fee revenues are used to pay for public parking facilities to serve the projects paying into the fund.

In lieu fees do not impose a cost on developers or businesses. Minimum parking requirements impose the costs and the in-lieu fees provide a means to manage the parking costs. A parking requirement without an in-lieu option can cost a developer or business more than the same parking requirement with in-lieu parking.1

Pricing In-Lieu Parking

There is a wide range of pricing for in-lieu parking. In-lieu parking can be priced as a district "parking impact fee" assessed at a price per square foot of leased space or gross floor area or as a flat fee based upon construction costs for parking.2 (Please see attached in lieu parking survey.)

Current In-Lieu Program

The City's in-lieu program has two components3

• Payment of in-lieu fees by a private party
• Transfer of set aside funds by the city based upon City Council approval

The in-lieu program also provides the following allowance for providing in-lieu parking:

Building Size/FAR Percent Allowance In Lieu %On- Site

4001 sq. ft or less & 1:1 100% 0%

4001 sq. ft.or less & greater than 1:1 75% 25%

4001 sq. ft. or greater & less than 12,001 50% 50%

Recommendations for transfer of in-lieu fees are forwarded to City Council for consideration by the Downtown Enhancement Commission. If the City does not approve an in-lieu transfer then the private party must provide the funds for deposit in an in-lieu parking account. The amount of the in-lieu fees are based upon the number of required spaces for a project provided at a rate of $6000 per space. To date, in-lieu program funds have not been paid by a private party and have only been transferred pursuant to the above. The in-lieu program is restricted to a threshold limit of 100 parking spaces. The program has guidelines (described below) approved by City Council which have not been codified into the Zoning Ordinance

Current Criteria for Set Aside In-Lieu Fees as Amended 1/7/97

• Assignment subject to City Council approval
• In lieu parking available for all commercial uses
• In lieu funds for project under 10,000 square feet
• Maximum allocation up to 100% of the required parking

Recommendation:

1. Amend guidelines to provide for initial City Council request and approval to streamline process and shorten timeframe for consideration.
2. Codify guidelines into Zoning Ordinance.
3. Make the in-lieu fee commensurate with the actual cost of constructing parking.
4. Provide a monthly lease option for in-lieu parking spaces to reduce business start up costs for projects less than 10,000 square feet.
5. Amend Coastal LUP downtown parking requirements to 65% of required parking standards to minimize use of in-lieu fees.
6. Program remaining set aside funds for outdoor dining uses along Pier Avenue as originally proposed under the program
7. Direct staff to prepare implementation measures pursuant to above

Notes

1. For example a project which incorporates parking on-site loses valuable lease area. If the cost of the leases are close to or exceed the cost of land to accommodate parking then the parking costs are considered excessive and the project will not be developed. In some cases parking can consume up to 1/2 of the developable area and these cost are more than offset by typical in-lieu fees.
2. In-Lieu Parking Fees - UCLA School of Public Policy & Social Research, Donald Shoup, 1996 & Lea Associates Appraisal Report Lot C - March 1996333
3. Zoning Ordinance-Section 17.44.190-Off-Street Parking within Vehicle Parking Districts:

Parking requirements within parking districts shall be as provided in this chapter, except that when the City Council provides for contributions to an improvement fund in lieu of parking spaces so required, said contributions shall be considered to satisfy the requirements of this Chapter. If the Downtown Business Area Enhancement District Commission determines that the private party is responsible for the in-lieu fee, the private party shall pay said fee as requested by the DBAEDC.

SURVEY OF IN-LIEU PARKING FEES1

Parking Req'd

City In-Lieu Parking Fee Cost/per Space Land Use P/1000 Sq. Ft Cost p/ sq.ft2,3 Manhattan Beach $25,000 (greater than 1:1 FAR) Office 4 $71

Option: Monthly lease fee $25.00 in City

Structures (Limited by Coastal Comm.)

Hermosa Beach $6000 (Limited to100 by Coastal Comm.) Office 4 $24

Beverly Hills $20,180 (Varies in Parking District) Office 4 $59

(See note 2)

Palm Springs $9,000 Office 3.1 $28

Claremont $9,000 Office 2.9 $26

Pasadena Monthly lease fee $100 ---- --- ---

Palo Alto $17,800 Office 4 $71

Mill Valley $6,751 Office 4.4 $30

Davis $8,000 Office 2.5 $20

Berkeley $10,000 Office 1.5 $15

Notes:

1. Survey from In-Lieu Parking Fees, UCLA School of Public Policy &Social Research,1996 & Lea Associates Appraisal, Lot C 1996.
2. The cost of providing in-lieu parking is the product of the price per stall and the parking requirement. More restrictive parking requirements can result in more costly project parking even when the in-lieu cost per stall is relative low. (i.e. Beverly Hills reduces in-lieu fees to $6,265 per space for businesses in operation for at lease a two year period in order to encourage location of businesses with a successful "track record" in the city. However, even with this reduced rate the cost of providing project parking is high because the parking requirement is high at 1 space per 45 sq. ft. for restaurant use. Therefore cities can compensate for the cost of in-lieu fees with more restrictive parking requirements in order to ensure that fees and parking construction costs are balanced.
3. Cost per square foot calculated at total cost of in-lieu spaces required 1000 sq. ft
4. One city surveyed included operation, maintenance, revenue costs and the value of the property in calculating in-lieu fees.The in-lieu fee is the net present value of the parking costs per space (total parking cost minus parking revenue). This formula presumes there is no other 'public" benefit from the project.