Walnut Creek Adopts Housing and Traffic Fees

Walnut Creek adopted hefty increases in its traffic and affordable housing fees last week but BIA|Bay Area did help persuade city leaders to delay the fee hikes for three months until Jan. 1, 2018. The City Council also declined to hike the affordable housing impact fee by the full $4 per square foot that staff requested. Instead, the board bumped the fee by $3 per sq. ft. and inserted into the ordinance an annual rate adjustment based on the Engineering News-Record's Construction Cost Index. As a result of the City Council’s vote on Aug. 1, 2017, the traffic impact fee for all new development will be increased to $3,679 per PM peak trip, up from $2,830 or a 30 percent jump. The affordable housing impact fee or in-lieu fee for all new residential development will be $18 per sq. ft., up from the current rate of $15 per sq. ft. or a 20 percent increase. The council also eliminated the reduced tiered fee structure for projects of 2 to 9 units, so small developments will experience higher cost increases. Developers of rental projects will pay a straight impact fee while those constructing ownership units will have the option of paying an in-lieu fee or providing the units onsite at the percentages defined in the city's inclusionary ordinance. The rate will be adjusted annually based on the percentage shift in the ENR Construction Cost Index starting in January 2019. Neither the transportation or the housing impact fees will apply to projects with deemed completed planning applications as of Jan. 1, 2018.

BACKGROUND: Faced with myriad fee hike requests from advocates and program enthusiasts, Walnut Creek leaders have been debating the question of whether or not to increase a variety of fees for more than two years. But early on, BIA|Bay Area representatives and its members pushed city leaders to consider all fee increase requests in the context of the entire fee burden on new residential development. In response, the city hired an outside economic consulting firm, EPS, and commissioned a financial feasibility analysis of the proposed fee increases.

The results of that study convinced members of the City Council that it had limited room to exact more money out of the development industry and they placed affordable housing and transportation at the top of its priority list, choosing fee levels that the economist concluded the real estate market could handle.

The traffic impact fee increase is based on a significantly expanded transportation project list for which new developments must contribute towards the cost of construction. The city updated the nexus study and adopted the revised project list in October 2016, which grew from 28 projects with an estimated cost of $39.4 million to 52 projects with an estimated cost of $82.1 million.

On the housing side, the Walnut Creek City Council has a second round of debate pending that could add even more costs. Staff is recommending the city increase the inclusionary percentages, or the amount of low-income units that residential developers must provide as part of their projects: moderate income would increase from 10 percent to 20 percent; low income would rise from 7 percent to 13 percent; and very low would go from 6 percent to 10 percent. Councilmembers are also talking about penalizing developers of ownership projects who choose to pay the in-lieu fee by slapping them with higher percentages in the hopes it will encourage them to construct the units onsite. The City Council is expected to hold a key public hearing later this year.

Click here to view the Walnut Creek City Council agenda for Aug. 1, 2017, and links to the staff report and associated documents. Click here to view BIA|Bay Area’s letter to the Walnut Creek City Council dated Aug. 1, 2017. Click here to view the staff and consultant slideshows presented on Aug. 1, 2017.