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03-01-2006 PLANNING COMMISSION Minutes CITY OF CHINO HILLS PLANNING COMMISSION MEETING/PUBLIC HEARING MINUTES MARCH 1, 2006 CHINO HILLS COUNCIL CHAMBERS 2001 GRAND AVENUE CHINO HILLS, CALIFORNIA COMMISSIONERS PRESENT Mike Braun STAFF PRESENT Adam Eliason James DeStefano Abe Hovsepian Bradley E. Wohlenberg Art Bennett Winston Ward Karen Bristow ' Jeff Adams Zai Abu Bakar Adam Collier Dawn Vierheilig COMMISSIONERS ABSENT None The Planning Commission Meeting of March 1, 2006, was called to order at 6:00 p.m. by Chairman Bristow. Vice Chairman Bennett then led the audience in the Pledge of Allegiance. ITEM #4 - PUBLIC COMMENTS None ITEM #5 - CONSENT CALENDAR None • ITEM #6 - ACTION ITEMS None ITEM #7 - PUBLIC HEARING a. CASE NO: Affordable Housing Program for the City of Chino Hills OWNER/APPLICANT: City of Chino Hills Planning Commission Minutes—March 1, 2006 1 PROPOSAL: Consideration of the Affordable Housing Program components that should be implemented in the City of Chino Hills. LOCATION: Citywide RECOMMENDATION: That the Planning Commission recommend to the City Council: 1. Approval of the Affordable Housing Program components that should be implemented in the City of Chino Hills. 2. Adoption of an interim fee resolution establishing an in- lieu fee in the amount of $15,000.per new unit for an Affordable Housing Program. Community Development Director James DeStefano explained that the purpose of the meeting was to establish an Affordable Housing Program and to enact an in-lieu fee for use in creating affordable housing in the City of Chino Hills in the future. The purpose for tonight's special meeting is to have a general discussion and if prepared to do so, advise the City Council on what action it should take on this issue. Community Development Director DeStefano stated that for the last couple of years the City had been working on an Affordable Housing Program. Discussions have included in-lieu housing fees and have primarily focused on incorporating affordable housing within market rate projects being proposed by developers in the City. Before the City Council debated the issue �. and before the City Council received the Planning Commission's recommendation the Planning Commission debated this issue. When the City Council received the Planning Commission's proposal staff was asked to determine the details of an "in-lieu" fee. The City hired Keyser Marston Associates last year to perform the study and forward its recommendations based on the analysis performed. The reason that this matter Is before the Planning Commission now is because while the City continues to work on the merits of whether or not the City should enact an Affordable Housing provision, it continues to have the matter of State of California Housing and Community Development regulations, state housing policy, general plan law, etc., and the City needs to move forward and cause or facilitate the creation of affordable housing. The City recently submitted its new Housing Element to the State of California. In addition to the state requirements and the City's obligation to comply with state mandates and policies, the City has hundreds of thousands of new dwelling units working their way through the system and the City of Chino Hills is beginning to see the end of significant housing production. Thus, the City is at a point that if it were to enact an Affordable Housing program it should be done soon in order to capture from those projects. Beginning this month and over about the next six months about 1,200 dwelling units will move through the City's system and staff is seeking a timely City Council direction with respect to affordable housing. Community Development Director DeStefano reported that on March 14 staff intends to ask the City Council whether the City should enact an Affordable Housing program and if so, should the City require all new residential developments to contribute to the Affordable Housing program; and, what type of contribution would be appropriate (in-lieu fee or construction of affordable units); what amount should the project contribute or how many dwelling units should be created. Since the City Council has debated the issue of new construction of affordable units staff is focusing this discussion on the in-lieu fee as another possibility toward achieving the end goal. Planning Commission Minutes—March 1, 2006 2 Community' Development Director DeStefano stated that staff recommends the Planning Commission receive staff's presentation, receive public comment and recommend City Council approval of the Affordable Housing program in its conceptual form; and, adopt an interim resolution. Principal Planner Zai Abu Bakar presented staff's report, which is on file in the Community Development Department. Ms. Kathe Head, Keyser Marston Associates (KMA), stated that her firm was commissioned to look at what fee Chino Hills could justify charging to allow a builder to not provide inclusionary units on-site within their projects. The basic premise is that there is an inclusionary housing obligation imposed on new housing developments. In order to figure out what the fee (charge to the builder) would be is to determine the "affordability" gap between the market price and • rent in order to define affordable prices. .In this community the gap is about $600,000 per affordable unit. Ms. Head responded to Commissioner Braun that her analysis was based on 2005 affordability and pricing figures on the premise that there would be a 15 percent inclusionary requirement at the moderate-income level. In fact, the gap is disproportionately higher at the moderate-income level because 35 percent of income is attributed to housing related expenses; for low and very low, 30 percent of income is attributed. She said that it was not uncommon for cities with high- priced homes to be considered for an affordability program. In these cases, the analysis looks at how logical it would be for people to provide a moderate-income unit in a $900,000 range at a gap of $700,000 per unit. And in this particular case the analysis considered what types of products builders would likely build to achieve these goals were they allowed to build off-site or pay in-lieu fees. Most likely the product would be townhouses and the gap would be dramatically smaller at $10 per square foot rather than $30 per square foot in the more expensive subdivisions. In the case of rentals the gaps are even smaller at $6 per square foot. Staff used the analysis to translate the numbers into a per unit cost. Principal Planner Abu Bakar explained that based on KMA's conclusions, staff determined that a 3,000 square foot home was average to the area and lowered the per square foot price to $5 which translated to $15,000 for a new ownership unit and $5,000 for a new rental unit. Ms. Head explained that cities could charge less but not more. Ms. Head responded to Commissioner Braun that assuming the fees were applied to 100 units, about 4 percent of the units would be set-aside for affordable housing. Assistant City Attorney Bradley Wohlenberg indicated that the only legal requirement is that the City must provide a nexus between the fee and affordable costs. The City is concerned about meeting the housing needs assessment number. However, there is no strict guideline in state law with respect to how many units the City must provide. Ms. Head said this was one way that the City could meet its goals - inclusionary housing can never be the only way a City provides affordable housing. Commissioner Hovsepian expressed concern about the City's ability to meet the requirements whether or not it received credit for existing affordable housing and wondered how builders could justify building under the imposed regulations. It seemed to him that the numbers did not make sense with respect to economics and dollars. Principal Planner Abu Bakar said that the total number of units the City would be required to produce was 3,805 units, half of which was for very low, low and moderate income. Chairman Bristow said the City has an inventory that it Planning Commission Minutes—March 1, 2006 3 can count in the total number. LMs:Head said that the City's outstanding five-year obligation is about 1,700 units. ,Of the 3,805-unit requirement, 2,100 units are above moderate,and the City should have no problem meeting its goal. And, the City would need to fill an additional 1,700 units for low income. Vice Chairman Bennett felt that the City could not meet its option to provide units and that the only recourse was to provide an in-lieu fee option. Ms. Head agreed with Commissioner Braun that the housing stock prices would tend to increase over time and the gap would continue to increase. Vice Chairman Bennett asked if there was any attempt to determine what the real figures would be for Chino Hills and Ms. Head responded that the City's median was dramatically higher than the rest of the County. If the City were able to adjust its figures there would still be a gigantic affordability gap. Commissioner Hovsepian remained very concerned that Chino Hills would not meet the 1,700 units using the County's median income. Ms. Head said she would not dispute Commissioner Hovsepian's statement because it seemed to her unlikely that the City could meet the requirement. Commissioner Braun asked if the state provided recourse for cities whose incomes were significantly higher than the County median. Ms. Head responded that Chino Hills had attempted to protest its numbers through SCAG. Senior Contract Planner Joann Lombardo said that Chino Hills had high density that met the State's criteria for affordable housing and the City was able to show it has an amazing amount of multi- family housing. Unfortunately, the multi-family sites were built out and the concern was about what would happen over the next five years. This program would be of huge benefit for the next cycle that is beginning now. Cities can team up with non-profit developers, Habitat for Humanity, and other organizations that would help stretch dollars and meet affordability requirements. Senior Contract Planner Lombardo responded to Commissioner Braun she understood that there were no penalties the state could impose. However, the City would be open to litigation if a developer came in and said the Housing Element was not in compliance, which could mean the General Plan was not in compliance. Commissioner Eliason asked about legislation and Senior Contract Planner Lombardo responded that the recent focus was on density and mixed- use projects, the most a city could do unless it incorporated an inclusionary housing ordinance for development. Community Development Director DeStefano said that in theory if the City does not have a certified Housing Element it does not have an adequate general plan and that can be used as a tool by housing advocate groups and no-growth groups against the City. Typically, temporary restraining orders are issued to cities and cities have responded with necessary documentation to clear up the issue. Every couple of years the state legislature has attempted to.initiate rules that said if cities did not have a certified Housing Element they would not be able to receive certain state subventions. Senior Contract Planner Lombardo said that the Dutra legislation was not passed and that it had remained a very volatile topic. Ms. Head said she thought the state was taking a greater role in zoning and expected the state to become even more restrictive. Commissioner Braun asked if the numbers were understated because they were based on 2005 figures and•Ms. Head responded that with the new reporting period it was likely that the numbers would be higher. , . . • Planning Commission Minutes—March 1, 2006 , -. 4 Vice Chairman Bennett asked if the City would be in substantial compliance if it were to incorporate the in-lieu fee program and Ms. Head said she believed that every effort toward doing affordable housing would show a good faith effort. Vice Chairman Bennett said he was at issue with the fee being put on the remaining developers and asked if the City could impose a nominal $1,000 instead of a $15,000 fee if the City was in substantial compliance under the in- lieu fee program. Ms. Head said the issue was the math and the figure of $31 was already dramatically less than the fee that could support the affordability gap. She felt it would be a meaningless gesture to reduce the $15,000 fee to $1,000 and get 2 or 3 units instead of 200 units toward the 1,700-unit compliance. Commissioner Eliason asked about the math on page 4 of staff's report. Ms. Head responded that in order to meet the RHNA number of affordable units within the remaining number of building units the City would need a $36,000 per unit subsidy in order to meet its obligation. Commissioner Eliason asked if staff would change the last sentence of the paragraph referring to the allocation to specific programs on Page 4 as follows: "to provide or assist affordable housing for future or current residents in Chino Hills." For example, he is a strong supporter of program #5 — Rehabilitation funding (page 5) and this type of program could offer deferred loans to income qualified residents to make improvements to their homes in the Los Serranos area. Senior Contract Planner Lombardo said that RHNA looked at new housing only and would not provide credit for home rehabilitation. Credits for first time homebuyers would have to apply to new structures. Commissioner Braun asked if there were other types of assistance for first time homebuyers. Senior Contract Planner Lombardo responded that the City could subsidize a certain number as new housing. Commissioner Eliason felt that subsidies should - help to permanently or at least in the long term reduce the rent so that the unit would be affordable. He wanted to hear from the developers before making further comment. Commissioner Hovsepian asked about the length of the typical affordability covenant. Ms. Head explained that for RHNA there was no actual covenant requirement and that it had to be new affordable units. The covenant is 55 years for rental units and 45 years for ownership units. Senior Contract Planner Lombardo responded to Commissioner Hovsepian that according to the Housing Element, the City would have to maintain the affordable housing unit for at least 10 years. Commissioner Eliason felt it would be in the City's best interests to make the units affordable for as long as possible. He also recommended that staff establish a face for "affordability" i.e. teachers, people with jobs, individuals who make good livelihoods because it is an expensive living market. Ms. Head said the ordinance called for a 30-year covenant and the amount could be bought out up front as opposed to paying every year. The tenant would pay affordable rent and the property owner/developer would have subsidized the units to pay the gap. Commissioner Hovsepian said that as a developer he would want to at least break even on the revenue. He wanted to know where the stream of funds would originate to pay the gap and Ms. Head explained that the math would not work for rentals vs. buyers and that the program would have to start with a developer that wanted to build market-rate rentals. Once the apartment was built the City would have provided the difference between the market rents and the affordable rents through an up front subsidy and the City would be out of the transaction at that point because the developer/owner had signed a covenant to maintain the subsidy for the 30-year period. At this time the amount of market rent that the City could support in the current marketplace is insufficient to support buying land and building rental units regardless of any affordability consideration. As a result, Chino Hills has no significant apartments in its future. Planning Commission Minutes—March 1, 2006 5 Commissioner Braun said cities could always be challenged. Assistant City Attorney Wohlenberg responded that he was not aware of anyone being challenged for charging a fee that was too low. Commissioner Braun asked if 4 percent would indicate reasonable steps toward the City meeting its affordable housing obligation. Assistant City Attorney Wohlenberg said that whether it was enough would be a policy decision because the Court would be reluctant to substitute its own judgment for that of the City Council. Ms. Head emphasized that this was only one component of the Housing Element and at the end of the day the City's Housing Element needed to show how the City intended to meet its subsidy need toward its affordable housing obligation. Commissioner Eliason said that in addition to meeting the State's requirements one of the most important aspects of this discussion was to decide what would be created in Chino Hills and how the money would be used because the City has a narrow window of opportunity to do something that would benefit a mixture of incomes in the community without deteriorating its quality of life. Vice Chairman Bennett supported the notion that areas like Los Serranos should be rehabilitated. And while this program does not support rehabilitation it would not prevent the City from taking rehabilitation of certain areas into account by providing a mixture of programs, supporting covenants, etc. He asked if it was appropriate to set up.the fees. He reiterated his feeling that the concept was inherently unfair to developers at this point in history because there was no way to apply requirements to built out properties. However, he would like to hear BIA's alternatives to the in-lieu fees regardless of the future use of the funds and ultimately, he had a problem with a "one size fits all" approach. Therefore, he would like to determine what it would take to meet the State's absolute minimum requirement and what it would cost the developers to build affordable units. In addition, he would like to know how other cities without redevelopment agencies were meeting their mandates. • Chairman Bristow stated that Chino Hills has made previous attempts to implement an affordable housing program and it was originally determined that there would be 35 percent affordable housing in the City and the plan evolved to 25 percent. However, the units that were built during that period are no longer affordable. Apartments were built with money that was subsidized over 30 years and that money has come and gone and those units are no longer affordable. What the attorney and consultant said tonight is true — Chino Hills must put it in writing, send it to the State and it will most likely have a 10-year shelf life. Commissioner Braun stated that whatever was decided, the developer would pass this on to future homebuyers so that two-thirds of future homeowners would be subsidizing housing for one-third of the future homeowners if the City were to meet all of the requirements. Ms. Head disagreed because in her opinion it would not be the homeowners, it would be the developer or the landowner. She said she has a fundamental premise that almost 100 percent of the time developers charge whatever the market will bear. Commissioner Braun agreed with Vice Chairman Bennett that he liked the sliding scale based on a square footage basis. Chairman Bristow opened the Public Hearing. Mr. Frank Williams, BIA, 8711 Monroe Court, Rancho Cucamonga, stated that this issue has been on the table in Chino Hills since the early 1980's and most recently in 2004. His Planning Commission Minutes—March 1, 2006 6 • disappointment was that the staff report did not include information that BIA had provided the City for the past two and one-half years. He said he was not opposed to affordable housing but that BIA had provided the City with studies that were conducted by the Independent Reason Foundation that indicated inclusionary housing was a failed public policy because it does two things: it makes housing more expensive or there is less housing. Tonight's Power Point presentation includes information that BIA has gathered about what other cities have done and how few units they have provided under inclusionary zoning. For almost two years City staff has told the City Council that HCD required the City to have inclusionary zoning. HCD's website indicates that inclusionary zoning is not a requirement. BIA is proposing alternatives and in-lieu fee discussions should take place after the City's plan is in place. If the Planning Commission is serious about affordable housing it needs to create a master plan with an affordable housing task force and an affordable housing non-profit agency to leverage the dollars designated for affordable housing. He recommended that the City charge $1,000 per year to get the non-profit up and started. He showed a brochure published by the Housing Authority of San Bernardino County listing cities that provided make-sense affordable housing using leveraged dollars, tax credits, grants, community block grant monies, etc. The HUD website recommends creation of an affordable housing task force to come up with a master plan as a first step. He said that in his opinion, to put affordable housing on the backs of a few individuals who are building homes in the City is not fair. Commissioner Braun asked Mr. Williams if any city in southern California had an affordable housing program that was acceptable to the BIA and Mr. Williams responded that BIA accepts every city whether they have a plan or not, although BIA filed a lawsuit in the Superior Court of Sacramento in one instance. Mr. Carlos Rodriguez, Senior Vice President, BIA, 8711 Monroe Court, Rancho Cucamonga, said that in his opinion the Planning Commission needed to be innovative and think outside the box to meet the affordable housing challenges and, he believed that the City could do better than the recommended approach. He further stated he did not believe that it was impossible to meet the 1,700-unit goal and that BIA wanted to work with Chino Hills to formulate a plan. Mr. Rodriguez said that the City's consultant would admit that this plan was somewhat arbitrary and that nothing precluded the City from adjusting the fee. He launched his Power Point presentation. He said that the BIA wanted to partner with the City, residents and stakeholders and was proposing a number of solutions that were included in the handout packets. Neither State law nor department policy requires the adoption of any local inclusionary ordinance in order to secure approval of a jurisdictions housing element. BIA conducted a poll in January and found that plus or minus 5 percent, 56 percent of residents believe the cost of housing is too high; 70 percent believe that for the average family in Chino Hills housing affordability is a problem; 69 percent oppose an in-lieu fee that goes into a set-aside fund for affordable housing for each new house constructed; 52 percent oppose a policy that requires set-asides; 75 percent disagree with people who would say that it was a good idea to require new home buyers to help pay for affordable housing; 57 percent were less likely to support such policies knowing that homebuilders would have to raise home prices for other buyers; 77 percent were less likely to support such policies knowing the city had no plan in place for using the money. BIA recommends that the City take a collaborative approach, make a good faith effort, direct staff to create a master plan for affordable housing; determine how many homes are needed; determine how much each home will cost; where homes will be located; determine whether the community is aware of the needfor this plan; find out about State and national models; note distinctions between residential single family and multi family units; create a task force; request Planning Commission Minutes—March 1, 2006 7 community input; educate residents on goals and needs; identify national and statewide models by promoting a public and private sector partnership. He said that if the various entities work together they can come up with an innovative approach that will work. Mr. Rodriguez recommended the following approaches: think outside the box, adjust the General Plan; adopt planning policies allowing for smaller lot subdivisions; review setbacks, parking and other building standards; zone more sites for multi-family; adopt a transfer tax on home re-sales within the City; set aside owned land or rezone open space specifically for affordable housing; partner with affordable housing non-profits; waive or adjust development impact fees; and, pursue public support of government Code 65915-18 (ballot initiative allowing density bonuses). He spoke about HUD award winning case studies for the cities of Oxnard and Corte Madera and presented handouts to the Planning Commission. He restated his recommendations including a recommendation to continue this matter to a future discussion date to allow for further study. Mr. Williams explained that the transfer fee was a fee charged when a house was re-sold. For every new home sale there are 5 re-sales and it is a way for cities to raise money for an affordable housing program. Mr. Williams agreed with Chairman Bristow that consideration of a transfer fee would probably have to go to a vote of the people. Commissioner Eliason asked how realtors would feel about a transfer fee and Mr. Williams responded that it was a mixed bag. Commissioner Eliason disagreed and said that there are many examples of realtors strongly opposing such a plan. Mr. Williams stated that for example the realtors, builders and city officials in Morongo talked about a transfer fee to reduce development impact fees. Vice Chairman Bennett said that a transfer fee would affect the seller of the property. Commissioner Eliason said he favored consideration of a transfer-fee but that it was not within the purview of the Planning Commission to render such a decision. Mr. Williams said that the law allows up to a 55 percent transfer fee. Vice Chairman Bennett said that some cities collect $12 per $1,000 of the resale value and that it is collected by the county recorder and transferred back to the jurisdiction. Vice Chairman Bennett was not sure if Chino Hills could legally implement a transfer fee and Mr. Williams said these concerns verified his recommendation that the City should form a task force. Community Development Director DeStefano pointed out that whether or not the City chose to enact the suggested program it would be a substantial amount of money. He stated that according to the Sunday, February 12, Los Angeles Times, 1,200 single family homes and 216 condos for a total of 1,500 dwelling units changed hands in Chino Hills in 2005 which would translate to $15,000 in revenue and whether or not the City would enter into such a program it would not result in a significant amount of money that could be utilized for the task force being suggested. • Caitlyn Lynch, Southern California Association of Non-Profit Housing (SCANPH) said her association was a regional non-profit organization of developers, cities and banks with a goal of cities having affordable housing throughout southern California. The-organization has over 400 organizational members throughout the industry and the. affordable- housing that the organization builds produces some of the best housing on the block. Her organization believes that inclusionary zoning is a viable tool that the members use to support the building of affordable housing and inclusionary housing can be especially useful for an area such as Chino Planning Commission Minutes—March 1, 2006 • - - 8 . Hills. SCANPH recently released a report on inclusionary housing that supports profiles and analyzes inclusionary housing projects in seven regional cities including Oxnard that has a 10 percent mandatory inclusionary policy targeted toward low income households. SCANPH looked at how each city's policy works and found that inclusionary housing did not stop overall housing construction and that inclusionary housing created affordable housing that would not otherwise be permitted. Additionally, the survey found that inclusionary housing was not meant to punish any sector of the community. In fact, last July the Homeowners Association of northern California and the non-profit Housing Association of northern California released a joint policy brief registering their support for inclusionary housing and finding ways that the two entities could work together for more housing during a time of limited construction. She concluded that inclusionary housing increases overall housing supplies and provides quality housing for all sectors of the community. SCANPH is pleased to offer its assistance to the City of Chino Hills over the next few months during further discussions of this issue. Vice Chairman Bennett asked if SCANPH had participated in any challenge where a city was found not to provide housing. She provided the Commissioners with handouts and CDs. Mr. Scott Redsun, Executive Vice President, Meritage Homes, 5161 California, Irvine, spoke about the City. He said that one of the items not discussed about the BIA poll was that close to 90 percent of the citizens believed that the City was being run correctly. Over the past 10 years the City has developed standards to limit development and limit costs of developments by increased minimum lot sizes and increased ridgeline ordinances. Now the City wants to charge a fee to recoup development costs. His firm does not have a problem paying a $1,000 fee to fund studies and create organizations but it would take a community to finally create affordable housing by increasing density, redefining land uses and finding land uses within the City wherein a developer could go from 3 units per acre to 20 units per acre. Any such determination would have to go to a vote of the people and the people must be involved in the planning process. The City is essentially asking property owners or 1,200 residents to fund the fee. He felt it was time to go back to the drawing board and get the community involved in solving this question and he took exception to the City Council excluding the commercial developers from the discussion. Commissioner Eliason asked how long Meritage Homes had owned the land. The response was five years. Mr. Redsun indicated to Commissioner Eliason that his Pine Valley Estates project is comprised of 98 units. He responded that values as well as costs have increased. Ms. Mary Parente, 8559 Edison Avenue, Ontario, said she has owned and paid taxes on her Chino Hills land for over 50 years and according to the figures indicated tonight her project would pay half of the funds the City was seeking for affordable housing. Her land values have gone up and she is not opposed to helping with the project but felt that the community should contribute to the plan. It seemed obvious to her that the remaining four landowners were easy targets for an affordable housing program and she asked the Planning Commission if they were willing to personally contribute to affordable housing. She said she could not compete with BRE if a 15 percent tax were implemented because she could not pass the tax on to her renters. In addition, she would have a more difficult time leasing the apartments if she was forced to increase the rent to pay for the tax. She asked the Planning Commission to remain objective and consider appropriate alternatives. Planning Commission Minutes—March 1, 2006 9 Mr. Walt Courson, 3189A Airway Avenue, Costa Mesa, said he found tonight's discussion encouraging and commended the Commission for participating. He thanked Community Development Director DeStefano and his staff for bringing this matter to the Planning Commission and for giving the community and stakeholders an opportunity to participate. He thanked Community Development Director DeStefano for looking at the fee structure realizing that there was a significant difference between single family and multi family. He felt that it was necessary to study this matter further and that the community and stakeholders should be involved in the discussions. The in-lieu fee has to be in place when there is an ordinance and he felt that the fee if implemented should be somewhere between $1,000 and $15,000. In his opinion the community would never be able to recover economically but the City should make a good faith effort toward reaching a solution. Mr. Frank Williams, Chairman, President & Founder of a 501(c)(3) non-profit affordable housing and community development corporation said he became active in affordable housing in 1998 and since that time the Housing Action Resource Trust has assisted more than 50,000 homebuyers in the purchase of homes, has gifted over $200 million in private money and owns over 500 apartment units for low-low and low and moderate income families. They recently completed a 44-unit condominium project in East Highland Ranch and a project in Barstow where most of the units were 'counted toward the cities Housing Elements.. This type of private funding can help assist Chino Hills with affordable housing. He reiterated that he opposes inclusionary zoning because it does not work and in his opinion, there.are better ways to meet requirements than an in-lieu fee. ' . . Commissioner Eliason asked who provided the gift funds and Mr. Williams responded builders, developers, banks, insurance companies and anyone else he,is able to find who would donate. Commissioner Eliason asked why builders would contribute to that fund and not support an in- lieu fee. Mr. Williams responded that it was voluntary and that his organization was able to produce affordable housing. Commissioner Eliason asked if there were a tax benefit for contributions to his non-profit and Mr. Williams responded that he was not an accountant but that his organization tells contributors to check with their accountants. When Commissioner Eliason pressed Mr. Williams for other reasons, Mr. Williams indicated that builders are able to sell their houses faster. Chairman Bristow asked if most of the units were high density or included single-family units. Mr. Williams said that almost a quarter of the gifts were made in southern California and some here in Chino Hills. Chairman Bristow reiterated that she had asked what type of housing the builders were building. Mr. Williams responded that they were normally tract homes, some condominiums and manufactured housing. Commissioner Eliason asked 'if developers who contribute expect the money to be used for their houses and Mr. Williams responded "absolutely." Every major builder uses his organizations' programs and in some cases renters are subsidized through the Section 8 program. He said that SCANPH was a wonderful resource because it represented affordable housing organizations and had a wealth of resources. If Chino Hills decided to create an affordable housing task force he would encourage that the City reach out to include members of SCANPH. The building industry knows how to build and the government does not allow his organization to help solve the affordable housing problem. Commissioner Eliason asked if there was any income restriction on the 7,200 square foot homes and Mr. Williams responded that there were no income restrictions and an individual did not have to be a first time homebuyer although the demographics indicated that most homebuyers are minority moderate- , Planning Commission Minutes—March 1, 2006 10 income first time homebuyers. He represented to Commissioner Eliason that in his opinion staff had tunnel vision. Commissioner Eliason said he gathered from Mr. Williams' statements that builders would rather contribute to his organizational fund rather than in-lieu because there were no income restrictions and there was a tax benefit. Mr. Williams said that he eliminated all of the government restrictions from the down payment assistance program and it works. In fact, almost half of the HUD pool comes from down payment assistance programs throughout the United States. He felt that the City needed to rely on experts to assist them in making a decision about the affordable housing program. Commissioner Eliason asked if with Council approval Mr. Williams would be opposed to immediate implementation of the $15,000 in-lieu fee and work toward lower fees, a better program and leveraging so the City would not miss the opportunity to capture all of the units because the proposals that have been put forth this evening will take time to implement. He wants the City to move forward and not lose its ability to capture the fees. Mr. Williams responded that his organization would be adamantly opposed to the adoption of a $15,000 fee tonight without knowing the source of the money. Commissioner Eliason asked Mr. Williams if he would be in favor of the City adopting a program and working with Mr. Williams, staff, all of the stakeholders and residents to arrive at a conclusion to support the program that the City wanted in place. Mr. Williams said that Commissioner Eliason missed the whole point that adopting a fee would accomplish nothing except to create more expensive housing and not reach the affordable housing goal. Mr. Williams said it appeared to him that this was an opportunity for the City to grab dollars and not solve the problem. He said he did not believe the City was serious about solving the affordable housing problem. If the City was serious it should go about implementing a program in the right way because it was a shared responsibility and the City should not go after people just because it can. Chairman Bristow closed the Public Hearing. Commissioner Hovsepian asked if the City was operating under any time constraints and was staff intending to include commercial developments. Community Development Director DeStefano said it was staff's opinion that there were no time constraints. However, staff believes that something should be done because the City is losing opportunity to capture fees as building projects move forward. To his knowledge the City has not contemplated capturing dollars from commercial development and tonight's discussion does not include asking commercial developers to help fund this obligation. Vice Chairman Bennett said the collaborative recommendation sounded great to him and he would like to believe that the citizens were sensitive to the need for affordable housing. However, about ninety percent of the residents believe the City is being run well and they do not care to actively participate and he felt it would be very difficult to find participants for a task force. No growth is a major consideration in this community and individuals locate in Chino Hills for the rural atmosphere and do not want more homes nor do those individuals who have already purchased their homes have any concern about what new buyers are paying. In his opinion, setting aside City land is not an option. Adopting a transfer tax may not be a bad idea if the City has the statutory authority to do so because it would go to his basic premise that the funds should be spread throughout the community. Perhaps there is no other way to come up with, a payment that would put the City in compliance with its Housing Element but he has a problem with the "one size fits all" mentality and believes that the fee should be reworked and that it should not be a lump sum fee. If the City did not build affordable housing the gift fee could not be deferred and a large portion of the fees that are used to fund schools and other items over which the City has no control could not be waived. He said he spoke with several Planning Commission Minutes—March 1, 2006 11 people about tonight's meeting and most had no clue about the subject matter. Staff has labored over the subject of affordable housing for some time. The City has not received much input because compliance is a moving target and because developments are the only thing left to help the City comply with the housing element. The inclusionary in-lieu fee may be the only viable option. To do nothing is wrong and to do it haphazardly is wrong as well. In his opinion, if the Commission wishes to move forward with the inclusionary element the $15,000 should be lowered and the consultant should determine if there are other creative ways to incorporate the documented transfer tax. Perhaps the City should also consider applying a similar fee to the remaining commercial development in the City. Commissioner Braun said he viewed the transfer tax as unacceptable because the compliance issue was in regard to new housing and was not an obligation on the existing housing stock. Staff and KMA have worked hard on this. However, he felt the overall plan was incomplete. He said he understood and appreciated staff's constraints. The current proposal is only for collecting fees and does not have an associated plan for subsidizing and building affordable housing, the real issue. Commissioner Braun believed the City should explore other options and that the Commission should recommend presentation of the proposed plan to the City Council as an informational item so that staff and the Commission could receive the Council's direction. Commissioner Eliason said this was originally an inclusionary ordinance but was not • inclusionary in its present state. Staff is proposing an "in-lieu" fee. Ms. Head stated there must be an inclusionary ordinance as well because cities cannot implement an in-lieu fee without the inclusionary ordinance. Commissioner Eliason said BIA presented several good ideas that he supported but BIA could not explain why those ideas could not be implemented after the in-lieu fee was adopted. He felt there was no downside in formulating a plan once staff was made aware of the amount of money that would be available to move forward with a plan. Staff indicated that if nothing is done within the next six months the City stands to lose $18 million dollars in in-lieu fees, a fee that has been reduced over time. In his opinion, the Commissioners are fooling themselves if this continues to be delayed. In fact, the community strongly supports this premise and the City bears the burden of deferring implementation. It is not a profit to the City, it is an actual cost to the City and all fees have a direct cost relationship and he would not want the City to bear the cost of waiving the fee. He said that while he supported the transfer fee he did not believe that Chino Hills had the political will to move forward with that concept. If a $700,000 house increases in price by 2 percent it adds $15,000 to the value of the house. During the past five years real estate values have increased 17 percent per year. And while this is not all profit to the builder, he believed that 2 percent was a small amount of the increase that could be contributed to an affordable housing fund. He felt that the City should not look just at affluence but at what the community could do to help people who need to have the advantage of affordable housing. Chairman Bristow said she always wanted to look further into whatever information was available and she would favor having a small amount of time set aside in order for the Commission to digest the information provided this evening. She said she was not impressed with all of the materials provided tonight and -she.was also not very impressed with the information provided this evening because she had lived in the.community for 38 years and believed she knew how a lot of the residents felt about this subject. In fact, the new residents do not have an appreciation:for how difficult it is forfirst time homebuyers to own in Chino Hills. Staff has traveled a bumpy road during this process; she believed they had made a good effort to move this matter through to the City Council and felt that the Council would be receptive to Planning Commission Minutes—March 1, 2006 12 • r the proposal. It is not unusual that current buyers pay more for their homes and this is no different. And while it may not be fair, that is the way it works. If Chino Hills were not such a young City it might have been able to set aside funds to consider other options. When Chino Hills approved its first General Plan, high-density land was set aside and not one developer took advantage of the plan so the effort went by the wayside and all of the good sites are gone. Commissioner Braun asked what options were available to the Planning Commission. Community Development Director DeStefano responded that this was an urgency resolution that would allow the City Council to adopt the fee and by adopting the fee the City Council would be supporting the facts behind the fee proposal. This item was brought before the Planning Commission as an informational item so that the Commission could act as a sounding board for the development community and provide the City Council with the Commission's thoughts and recommendations. If the Planning Commission wished to continue this for a period of time in order to further study the matter he assumed the Council would not hold the March 14 meeting. It was City Manager La Belle who had asked staff to bring this matter to the Planning Commission prior to it being forwarded to the City Council. Tonight's meeting was set up as a public hearing so that as much information as possible could be passed along to the City Council for their edification and consideration. Community Development Director DeStefano responded to Vice Chairman Bennett that if the Commission acted on the item tonight, it would be recommending that the City Council enact a program that would include the five items listed in staff's report. If the question is whether staff has the details to support implementation of the recommended programs, the answer is no. Staff's concept is that should the fundamental issue be supported by the City Council, institution of the fee would not take place until occupancy of the dwelling units which staff estimates would be about a year and a half from approval based on the number of projects currently under consideration. Within that period staff would come back to the Commission and Council with details for implementing the kinds of programs the City would wish to implement and during that period the City would most likely employ many concepts to arrive at the final implementation stage. Commissioner Hovsepian said he liked the idea of fine-tuning the plan after approval. If the City does not approve an in-lieu fee or any type of money-generating program toward affordable housing, any developer in the meantime would be excluded from the program. Community Development Director DeStefano said that, in general, Commissioner Hovsepian was correct. Community Development Director DeStefano further stated that there was a . provision in the Tom Wynne 10-unit project, as well as provisions in one or two other projects that contained very generalized conditions for fees. Community Development Director DeStefano said that this issue should not be driven by whether the City would be able to attach the fee to the current crop of projects but rather it was a fundamental policy decision about whether the Commission would recommend such a program to the City Council and how the program would be developed and implemented. Commissioner Eliason asked if they could review this information and show up at a City Council meeting. Assistant City Attorney Wohlenberg stated that this was not a zoning matter; it was the City Manager's intent to receive input from the Planning Commission that could be passed along to the City Council. Vice Chairman Bennett said that the City Council would review this on March 14, 2006, and he believed the Commission had an indication about the Council's direction that the Council Planning Commission Minutes—March 1, 2006 13 • believed that the in-lieu fee needed to be placed in motion. Community Development Director ._• DeStefano cautioned the Commission that it was not taking direction from the City Council. , Since the Commission is not required to do anything but forward a recommendation he would suggest that the Commission recommend approval of an affordable housing program, components that should be implemented in the City of Chino Hills with specific implementation of the plan to be developed and presented to the City Council for approval; with an in-lieu fee of $5,000 for new single-family residences and $1,000 for multi-family residential. Commissioner Braun felt that the program with caveats should go forward to the City Council as proposed. Assistant City Attorney Wohlenberg stated that under State law, zoning matters must first be considered by the Planning Commission with its recommendation to City Council and in this case the City Manager wanted as much input as possible from the Planning Commission along with its recommendations and, of course, the City Council would not be bound by Planning Commission action. Commissioner Eliason said there were a mixture of, ideas on this_ issue and that the Commission could merely forward its input to the City Council. Chairman Bristow wanted to postpone this item,to have time to review the materials because she does not like implementing a fee without knowing the end result. Commissioner Eliason said it would take a tremendous amount of effort for staff to come up with a specific housing program in all .of its detail. Page: 5 of staff's report suggests five different ways and means to be able to use the money and "before the time that any in-lieu fee is paid that there is a specific housing program that has been approved by the City Council" would be an alternative he could support. Vice Chairman Bennett said he was not in favor of an in-lieu fee but believed it was the best alternative and he wanted the lowest figure possible in order for the City to be in substantial compliance. Community Development Director DeStefano said that tonight's meeting could be concluded and the Commission could forward the Commission's collective thoughts to the City Council. • Commissioner Eliason said the City Council needed to see the full minutes of tonight's meeting before their March 14 meeting. Vice Chairman Bennett recommended that the Commission not forward a specific recommendation to the City Council but direct staff to forward all comments from tonight's meeting to City Council in the best format possible should the City Council choose to go forward with the March 14 discussion on this item. Community Development Director DeStefano said the Planning Commission would not have minutes for approval on March 7. Therefore, it would be his recommendation that staff be directed to put together as much detail as possible in the form of meeting notes. Commissioner Hovsepian said he was afraid of implementing a $15,000 fee and that he had a problem with the in-lieu fee. He said he was in favor of an affordable housing program but had Planning Commission Minutes—March 1, 2006 14 a problem with the fee for 1,200 and 5,000 unit square foot houses. He suggested that the Commission notify the City Council that the Planning Commission was receptive to the affordable housing program components that would be detailed over time and that the Council should seriously consider a more equitable in-lieu fee and consider commercial developments as part of the equation. He felt the City had to act one way or the other no matter the consequences. Commissioner Eliason asked Ms. Head if she considered tying her analysis to square footage and she responded that her analysis was based on square footage and subsequently converted. The reason a city might use square footage would be to allow individuals building lower square footage and less expensive units a lower fee. However, there is a notion that if cities set a fixed fee there is a consistent measure for consideration of future revenue. COMMISSION ACTION: The Planning Commission took no formal action and directed staff to forward meeting notes to the City Council for their consideration prior to taking Council action. MOTION: Bennett SECOND: Braun AYES: Bennett, Braun, Bristow, Eliason, Hovsepian NOES: None ABSENT: None ITEM #8 - STAFF PRESENTATIONS None ITEM #9 - COMMISSION INFORMATION None ITEM #10 - COMMISSIONER COMMENTS None ITEM #11 - STAFF COMMENTS The Planning Commission Meeting of March 1, 2006 was adjourned at 9:00 p.m. to the next regularly scheduled meeting. `\ j �J COMMISSION Dawn Vierheilig APPROVED AT PLANNING ry) Planning Commission Secreta Da MAR 2 1 2006 Planning Commission Minutes—March 1, 2006 5 CITY OF CHINO HILLS