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HomeMy WebLinkAbout14 - Annual Reports on Development Impact Fees and Development AgreementsQ �EwPpRT CITY OF s NEWPORT BEACH `q44:09 City Council Staff Report November 18, 2025 Agenda Item No. 14 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Jason AI -Imam, Finance Director/Treasurer - 949-644-3126, jalimam@newportbeachca.gov PREPARED BY: Trevor Power, Accounting Manager - 949-644-3125, tpower@newportbeachca.gov TITLE: Annual Reports on Development Impact Fees and Development Agreements ABSTRACT: Pursuant to the Mitigation Fee Act (Government Code Section 66000 et seq.), the City of Newport Beach (City) is required to report on the receipt and use of development impact fees. In accordance with Government Code Section 65865(e) governing development agreements, the City must also comply with the reporting requirements outlined in Government Code Section 66006 for any fees received or costs recovered. RECOMMENDATIONS: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) Receive, review and file the annual reports on development impact fees and development agreements. DISCUSSION: The Mitigation Fee Act (Act) requires local agencies that impose development impact fees to produce an annual report each fiscal year, and a five-year report as needed, detailing specific information about the collection and use of such fees. Fees collected must be placed in separate accounts and not commingled with other sources of general revenues. Interest on each account must be credited to that account and used only for the purpose for which the fees were collected. The Act also requires that the City make periodic findings in order to justify continued receipt of unexpended funds, or possibly be subject to refunding a portion of such funds. Although the Act does not apply to development agreements, the reporting requirements on both the development impact fees and development agreements are the same and fall under California Government Code Section 66006. 14-1 Annual Reports on Development Impact Fees and Development Agreements November 18, 2025 Page 2 Section 66006(b) of the Act requires that within 180 days after the close of the fiscal year, the City must make available to the public a brief description of the fee, amount of the fee, beginning and ending balances of the account or fund for the fiscal year, amount of fees collected, and the interest earned. The Act also requires identification of each public improvement on which the fees were expended and the amount of the expenditures on each improvement, an approximate date by which the construction of the public improvement will commence, a description of each interfund transfer or loan made from the account or fund, and the amount of any refunds made due to the inability to expend impact fees. Section 66001(d) provides that, for the fifth fiscal year following the first deposit into the account or fund and every five years thereafter, the City shall make findings with respect to any portion of the fee remaining unexpended, whether committed or uncommitted. These findings must identify the purpose to which the fee is to be put, demonstrate a reasonable relationship between the fee and the purpose for which it is charged, identify all sources and amounts of funding anticipated to be utilized to complete incomplete improvements, and designate the approximate dates on which the anticipated funding is expected to be received. A five-year report is not required at this time. Historically, the only fees collected by the City subject to the Act were the Fair Share Traffic Fees collected from developers for transportation improvements, which are an Orange County Transportation Authority requirement to participate in the Measure M2 funding program. However, on November 12, 2024, City Council adopted a new Development Impact Fee Program to support new development impacts on recreation (e.g., community centers), police, fire, water and sewer facilities. The City has not yet collected any fees related to the new Development Impact Fee Program, but the attached annual report includes information for these fees to comply with the reporting requirements of the Act. Relative to all six fees, the City is in conformance with the Act and is not subject to any refunding requirements. Regarding Development Agreements, only the Newport Uptown Agreement is reportable for Fiscal Year 2024-25 as new deposits related to this agreement were received during the fiscal year and an unexpended balance remained at the end of the fiscal year. Attachments A and B provide additional narrative and all the required information related to the annual review and accounting of applicable development impact fees and Development Agreements, as well as periodic findings concerning unexpended funds. FISCAL IMPACT: There is no direct fiscal impact related to this item. Compliance with the Act is required to avoid the possibility of a requirement to refund fees paid by developers. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA 14-2 Annual Reports on Development Impact Fees and Development Agreements November 18, 2025 Page 3 Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A — City of Newport Beach 2024-25 Attachment B — City of Newport Beach 2024-25 Development Impact Fee Report Fiscal Year Development Agreements Report Fiscal Year 14-3 ATTACHMENT A City of Newport Beach Development Impact Fee Report Fiscal Year 2024-25 Mitigation Fee Act (AB1600) Assembly Bill 1600 (AB1600), commonly known as the Mitigation Fee Act (Act), was enacted by the State of California in 1987 and created Section 66000 et. seq. of the Government Code. The Act governs the establishment and administration of development impact fees paid by new development projects for public facilities needed to serve new development. Fees must be separately accounted for and used for the specific purpose for which the fee was imposed. Annual Reporting Requirements AB1600 requires the City to report fee information annually and every fifth year. Within 180 days after the last day of each fiscal year, the City must make available the following information from the prior fiscal year: 1. Brief description of the type of fee in the account or fund. 2. Amount of the fee. 3. Beginning and ending balance in the account or fund. 4. Amount of fees collected and the interest earned during the previous year. 5. Identification of each public improvement for which fees were expended and the amount of expenditures, including the total percentage of the cost of the public improvement that was funded with fees. 6. An identification of an approximate date by which the construction of the public improvement will commence if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement and the public improvement remains incomplete. 7. Description of each interfund transfer or loan made from the account, including the public improvement on which the transferred or loaned fees will be expended, and when each loan will be repaid and the rate of interest the account will receive on the loan. 8. Identification of any refunds made once determined that sufficient monies have been collected to fund fee -related projects. 1 14-4 For the fifth fiscal year following the first deposit into the account or fund, and every five years thereafter, the City must make the following findings with respect to any remaining funds in the fee account, regardless of whether those funds are committed or uncommitted: 1. Identification of the purpose to which the fees are to be put. 2. Demonstrate a reasonable relationship between the fee and the purpose for which it is charged. 3. Identification of all sources and amounts of funding anticipated to complete financing for incomplete improvements identified as part of the City's annual report. 4. Identification of the approximate dates on which the funding referred to in Requirement 3 is expected to be deposited into the appropriate account or fund. The City must make this information available for public review and must present it at the next regularly scheduled public meeting no less than 15 days after this information is made available to the public. This report is intended to satisfy the annual reporting requirements for each impact fee for Fiscal Year 2024-25. A five-year report was last completed in Fiscal Year 2020-21 and is not needed at this time. Excluded from this report are types of developer fees that are not subject to the reporting requirements of the Act. For example, fees collected pursuant to the City's zoning powers, rather than pursuant to the Act such as park -in -lieu fees. Annual Report To comply with Government Code §66006, the following information regarding AB 1600 fees is presented: 1) A brief description of the type of fee in the account or fund: Fair Share Traffic Fees — These fees provide funding to accommodate traffic generated by future development within the city and are separately accounted for in the Circulation & Transportation Fund. Recreation Facilities Fees — These fees provide funding to ensure new development funds its fair share of recreation facilities and are separately accounted for in the Recreation Development Impact Fee Fund. Police Facilities Fees — These fees provide funding to ensure new development funds its fair share of police facilities and are separately accounted for in the Police Development Impact Fee Fund. 2 14-5 Fire/Life Safety Facilities Fees — These fees provide funding to fund the fire facilities needed to serve new development and are separately accounted for in the Fire Development Impact Fee Fund. Water System Impact Fees — These fees provide funding to fund water facilities that serve new development and are separately accounted for in the Water Development Impact Fee Fund. Sewage Collection Facilities Impact Fees — These fees provide funding to fund sewer facilities that serve new development and are separately accounted for in the Sewer Development Impact Fee Fund. 2) The amount of the Fee: Fair Share Fee rate is $271.49 per trip for Fiscal Year 2024-25. See below table for schedule of other development impact fees. Maximum Justified Development Impact Fee Schedule Fire/Life Sewage Recreation Police Safety Water Collection LandUse Facilities Facilities Facilities System Facilities Residential - per Sq. Ft. $ 4.70 $ 1.01 $ 1.73 $ 0.90 $ 0.56 $ Noneresidential - per Sq. Ft. Commercial Office Industrial Total 8.90 $ $ 0.74 $ 1.82 $ 0.91 $ 0.70 $ 4.17 - 1.14 2.79 0.62 0.51 5.06 - 0.40 0.99 0.77 0.49 2.65 3) The beginning & ending balance of the account or fund: See attached Financial Report. 4) The amount of fees collected, and interest earned: See attached Financial Report. 5) An identification of each public improvement on which fees were expended and the amount of the expenditures on each improvement, including the total percentage of the cost of the public improvement that was funded with the fees: See attached Financial Report. 3 14-6 6) An identification of an approximate date by which the construction of the public improvements will commence if the City determines that sufficient funds have been collected to complete financing on an incomplete public improvement, as identified in the City's master plans, and the public improvement remains incomplete: There were no public improvement projects constructed in the fiscal year. The project utilizing fair share funds related to traffic signal synchronization identified in the previous year's report is part of the Regional Traffic Signal Synchronization Program in which another agency is serving as the lead in construction of the project. Once the project is completed, the lead agency will bill the City for the completed work. The lead agency did not bill the City in Fiscal Year 2024-25. Additionally, a project utilizing fair share funds related to the widening of West Coast Highway is expected to commence in Fiscal Year 2025-26. 7) A description of each interfund transfer or loan made from the account or fund, including the public improvement on which the transferred or loaned fees will be expended, and in the case of an interfund loan, the date on which the loan will be repaid, and the rate of interest that the account or fund will receive on the loan: There were no interfund transfers or loans during the fiscal year. 8) The amount of refunds or any allocation made pursuant to subdivision (f) of Section 66001: There were no refunds during the fiscal year. 4 14-7 Financial Report Development Impact Fees Revenues, Expenditures & Changes in Fund Balance Fiscal Year 2024-25 Revenues: Fees Collected Investment Income Net increase in fair value of investments* Total Revenues Expenditures: Capital Improvement Projects Net Change in Fund Balance Fund Balance, Beginning Fund Balance, Ending Total Project Costs (FY Only) Fair Share Funded Recreation Police Fair Share Facilities Facilities $ 246,771 $ 46,290 12,619 _ 305,680 Fire/Life Safety Water Sewer Facilities Capacity Capacity 305,680 $ 918,149 $ $ $ $ $ $1,223,829 $ $ $ $ $ *Financial Reporting standards require the City's investments to be reported at fair value. As such, the City allocates to this fund the fair value fluctuations due to the changing interest rate environment. S 14-8 ATTACHMENT B City of Newport Beach Development Agreements Report Fiscal Year 2024-25 Background A Development Agreement (DA) is a contract between a local jurisdiction and a person who has ownership or control of property within the jurisdiction. The purpose of the agreement is to specify the standards and conditions that will govern development of the property. The development agreement provides assurance to the developer that he/she may proceed to develop the project subject to the rules and regulations in effect at the time of approval, because the development will not be subject to subsequent changes in regulations. The DA should also benefit the local jurisdiction. The city or county may include conditions (mitigation measures) that must be met to assure that a project at a specific location does not have unacceptable impacts on neighboring properties or community infrastructure. The agreement may clarify how the project will be phased, the required timing of public improvements, the developer's contribution toward funding system -wide community improvements, and other conditions. The agreement can also facilitate enforcement of requirements, since it is a contract that details the obligations of the developer and local jurisdiction. Annual Reporting For DAs entered into or after January 1, 2004, Government Code §65865 (e) requires that the City shall comply with the reporting requirements pursuant to Government Code §66000, with respect to any fee the City receives or cost it recovers. Government Code §66006 requires the City to submit annual and five-year notices detailing the status of collected public benefit fees and be placed on the agenda for review at a public meeting not less than 15 days after the report is made available to the public. The meeting before the City Council must be held within 180 days of the end of the fiscal year. The report must include the beginning and ending balances, the amount of fees collected, and interest earned, expenditures by type, a description of interfund transfers or loans, and the amount of any refunds made. Excluded from this report are types of developer fees that are not subject to the reporting requirements under Government Code §65865(e). For example, these include fees collected pursuant to the City's zoning powers, such as in -lieu housing fees, and park -in -lieu fees. 1 14-9 Annual Report To comply with Government Code §66006, the following information regarding Development Agreement (DA) Fees is presented: 1) A brief description of the type of public benefit fee in the account or fund: a) Uptown Newport Development Agreement — On March 12, 2013 the City Council adopted Ordinance No. 2013-6 approving the Development Agreement for the development of a 25-acre, mixed -use residential project consisting of 1,244 residential dwelling units, two one -acre public parks, and 11,500 square feet of retail use located at 4311-4321 Jamboree Road. On April 28, 2015 the City Council approved the First Amendment to the Development Agreement that delayed the timing of payment of public benefit fees and park in -lieu fees. The DA specifies the term, permitted uses, public benefits fees, park in -lieu fees, dedication of park land and open space. Public benefit fees were required to be paid by Uptown Newport, LP as part of the DA approval, and are accounted for in the Facilities Financial Planning Fund. 2) The amount of the DA fees: a) Uptown Newport Development Agreement — $44,381 per residential unit for 22 units and $45,900 per residential unit for 2 units at the issuance of building permits for construction. 3) The beginning and ending balance of individual DAs: See attached Financial Report. 4) The amount of DA fees collected, and interest earned: See attached Financial Report. 5) An identification of each public improvement on which fees were expended and the amount of the expenditures on each improvement, including the total percentage of the cost of the public improvement that was funded with the fees: See attached Financial Report. 6) An identification of an approximate date by which the construction of the public improvements will commence if the City determines that sufficient funds have been collected to complete financing on an incomplete public improvement, as identified in the City's master plans, and the public improvement remains incomplete: The commitment and use of funding received from development agreements are analyzed annually and are utilized in conformance with the long-term Facilities 2 14-10 Financial Plan. Multiple projects on the Facilities Financial Plan are expected to commence over the next few fiscal years. 7) A description of each interfund transfer or loan made from the account or fund, including the public improvement on which the transferred or loaned fees will be expended, and in the case of an interfund loan, the date on which the loan will be repaid, and the rate of interest that the account or fund will receive on the loan: No interfund transfer or loans were made during the fiscal year. 8) The amount of refunds made pursuant to subdivision (f) of Government Code §66001 any allocation pursuant to subdivision (f) of Government Code §66001. No refunds were made during the fiscal year. Financial Report Uptown Newport Development Agreement Fiscal Year 2024-25 Total Project Costs (FY Only) Revenues: Developer Fees $ 1,068,190 Interest Income 16,411 Net increase in fair value of investments* 4,983 Total Revenues 1,089,584 Expenditures: - Transfers In/(Out): - Net Change in Fund Balance 1,089,584 Fund Balance, Beginning - Fund Balance, Ending $ 1,089,584 *Financial Reporting standards requirethe City's investments to be reported atfair value. As such, the City a I I ocates to this fund the fair va I ue fl uctuati ons due to the changing interest rate environment. �o Developer Agreement Funded 3 14-11