HomeMy WebLinkAbout15 - In-Lieu Park Dedication•
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CITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
COUING AGENDA
NO-
S -g
Agenda Item No. 14
April 24, 2007
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Planning Department
Brandon Nichols, Associate Planner
(949) 644 -3234, bnichols city.newport- beach.ca.us
SUBJECT: In -Lieu Park Dedication Fee Adjustment
Appraisal of Eastbluff and Bob Henry Park
RECOMMENDATION
Continue the item to May 8, 2007.
DISCUSSION
This item was originally scheduled for the February 27, 2007 City Council Meeting. The
item was continued to the following meeting in response to a request from the Building
Industry Association (BIA) for additional time to evaluate the proposed in -lieu fee
adjustment. Three subsequent continuances were granted by the Council to allow the
BIA time to work with City staff and formulate their comments.
The City received the BIA comment letter on April 12, 2007. To allow City staff adequate
time to evaluate and respond to the BIA's comments, staff is requesting this item be
continued to the May 8�h City Council meeting.
Prepared by:
Brandon Nichols, Associate Planner
Submitted by:
l
Sharon Z. Wood, istant City Manager
0'4/04(07 7,0:59 FAX 949 6508274 M.H. Sherman Co.
@1002
COUNCIL GENDA
ARDEu nwESTMENT COMPANY NO.
gg g 1
.� 2077 WEST COAST HIGHWAY C O U N 9 AG E N M
9OST OFFICE BOX 1715
NEWPORT BEACH, CALIFORNIA 92659 - .
19491642.1626 �y �/] -
April 4, 2007
Homer Bludau
City Manager
City of Newport Beach
P.O. Box 1768
Newport Beach, CA 92663 -3384
VIA. FACMIME; 949.644.3020 & U.S. MAIL
SUBJECT: Request for 30 Day Continuance of In Lieu Park Fee Issue
Dear Mr. Bludau
The purpose of this letter is to request a thirty day continuance of the proposed In Lieu
Park Fee agenda item.
�..,� Our consultants are developing some information for the purpose of working with staff
on this matter. The information will not be completed until next week, after your city
council meeting.
When we receive this information we would like to meet with staff and Conti= to work
on this important issue.
J appreciate your consideration of this request.
DTD jes
cs-
Sincerely,
/)a
D. T. Daniels
Executive Vice President
COUNCIL. GENDA COUN Gtr.iA
NO. NO.
CITY OF NEWPORT BEACH COUIU1 � �++�
CITY COUNCIL STAFF REPORT IdO.
3a �
Agenda Item No. 21
February 27, 2007
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Planning Department
Brandon Nichols, Associate Planner
(949) 6443234, bnicholsO- )citv.newport- beach.ca.us
SUBJECT: In -Ueu Park Dedication Fee Adjustment
Appraisal of Eastbluff and Bob Henry Park
INITIATED BY: City of Newport Beach
i . ISSUE
Should the City Council increase the City's In -Lieu Park Dedication Fee by adjusting the
Mir market land value per acre used in the fee calculation?
RECOMMENDATION
Adopt the attached City Council Resolution adjusting the fair market land value per acre
to be used in assessing In -Lieu Park Dedication Fees.
DISCUSSION
Background
Chapter 19.52 of the Newport Beach Subdivision Code (the Subdivision Code)
establishes parkland dedication and In -Lieu Park Dedication Fee (in -Lieu Fee)
requirements for new residential subdivisions. Per the Subdivision Code, when a fee is
required to be paid in-lieu of land dedication, the fee is computed by multiplying the
acreage of land, which would otherwise have been required to be dedicated, times the
fair market value per acre. Fair market value per acre is to be established by periodic
appraisal prepared by the City (Section 19.52.070). Periodic appraisal ensures that the
In -Lieu Fee remains current with property appreciation. The City Council last adjusted
the fair market land value used to calculate In -Lieu Fees in 1988. The adjustment
established the current fee of $6,894.37 per residential unit.
In -Lieu Park Dedication Fee Adjustment
February 27, 2007
Page 2
Assessing and Calculating Fees In Lieu of Dedication
California State Statute 66477 (the Quimby Act) establishes the methodology for
assessing and calculating park land dedication and in -lieu fee requirements. Consistent
with the Quimby Act, the Subdivision Code requires park dedication, and /or payment of
In -Lieu Fees, for residential subdivisions resulting in additional dwelling units. In -Lieu
Fees are assessed as a condition to the approval of tentative map or parcel map. In-
Lieu Fees are used to help fund the City's acquisition or rehabilitation of parkland to
meet the park and recreational demands of new residential development.
In accordance with the Quimby Act, if a proposed subdivision contains fifty parcels or
less, the subdvider may pay an In -Lieu Fee equal to the value of parkland that would
otherwise be required for dedication. If a proposed subdivision contains fifty parcels or
more, the decision making body shall determine whether land dedication, in -lieu fee, or
a combination of the two shall be required.
Pursuant to the Subdivision Code, the following factors are to be used in the
computation of parkland dedication and fee requirements:
• The City's established parkland dedication ratio of five (5) acres of parkland per
1000 people expected to reside in a subdivision (or .005 acres per person)
• The average number of persons per household in the City based on data from
the most recent available federal or state census (currently 2.09 persons per unit)
• The per -acre value of land In the City as established by periodic appraisal
Using the above factors, the In -Lieu Fee per new residential unit can be computed as
follows:
.005 acres per person X 2.09 persons per unit = .01045 acres of park land dedication per unit
.01045 acres x fair market value per acre = Required In -Lieu Fee per unit
Appraisal to Determine Fair Market Land Value
Since 1979, appraisal of the Eastbluff Park Site has been used to establish the fair
market value per acre to be used in computing In -Lieu Fees. Subsequent appraisals of
the Eastbluff Park Site resulted in three prior adjustments to the In -Lieu Fee, the last
being in 1988. The results of Eastbluff Park appraisals are summarized in Attachment
C.
In 2006, the City retained the firm of Reinhart- Fontes Associates Inc. to provide an
appraisal of the Eastbluff Park site and a second site, Bob Henry Park. Two sites were
•
In -Lieu Park Dedication Fee Adjustment
February 27, 2007
Page 3
appraised to provide a more accurate representation of average land value in the City.
Consistent with previous appraisals, the value of each property was assessed assuming
the sites had the following characteristics:
• Residential Zoning
• Density of 10 units per acre
• Utilities available
• Sites assumed to be vacant and unimproved
• Sites assumed to have relatively level topography
• Sites assumed to have no view potential
Since the fee applies only to residential subdivisions, residential use of the properties is
assumed in order to establish the fair market value of vacant, residentially zoned land in
the City. The table below contains the results of both appraisals and the adjusted In-
Lieu Fee if the appraisal results are used to establish fair market land value (calculated
using the methodology outlined in the previous section of this report).
APPRAISAL RESULTS, NOVEMBER 2006
1
575
For comparison, a table summarizing In -Lieu Fees for other Orange County cities is
provided in Attachment C.
Certification of Appraisal Results
If the City Council concurs with the results of the current appraisals, a resolution has
been prepared establishing a fair market land value of $3,250,000 per acre for use in
the calculation of In -Lieu Fees. In accordance with State Law, the updated fee would
not go into effect until 60 days after City Council approval.
Environmental Review
This action has been reviewed and it has been determined that the proposed action is not
a project subject to review under the California Environmental Quality Act (CEQA Section
15378 (bx4))
Public Notice
ANotice of this hearing was published in the Daily Pilot a minimum of 10 days in advance
f the hearing consistent with the requirements of the Municipal Code. Notice was also
In -Lieu Park Dedication Fee Adjustment
February 27, 2007
Page 4
mailed to interested parties who submitted written requests for notification regarding
matters relating to fee increases. Courtesy notices were also sent via U.S. Mail and e-
mail to parties staff believed would have an interest in the potential fee adjustment.
Additionally, the item appeared on the agenda for this meeting, which was posted at
City Hall and on the City website.
Prepared by:
l
randon Nichols, ssociate Planner
Attachments:
Submitted by:
z4Q7:Et2 6:� 4Y -Z-
Sharon ZWood, sistant Cfy Manager
A. Draft Resolution
B. Chapter 19.52 of the Subdivision Code (Park Dedications and Fees)
C. Tables (East Bluff Appraisal Results, Comparative Park In -Lieu Fees)
C�
0
Attachment A
Draft Resolution
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT
BEACH ESTABLISHING THE FAIR MARKET VALUE PER ACRE TO
BE USED IN ASSESSING IN -LIEU PARK DEDICATION FEES
PURSUANT TO SECTION 19.52.070 OF THE NEWPORT BEACH
MUNICIPAL CODE AND RESCINDING RESOLUTION NO. 88 -12
WHEREAS, Chapter 19.52 of the Newport Beach Municipal Code establishes a
parkland dedication standard of five (5) acres per thousand population expected to
reside in new residential subdivisions; and
WHEREAS, in subdivisions containing 50 lots or less, the subdivider may pay
an in-lieu fee equal to the value of land required for dedication; and
WHEREAS, in subdivisions containing more than 50 lots, the decision making
body may require land dedication, in-lieu fee, or a combination of the two; and
WHEREAS, Chapter 19.52 establishes that when a fee is required to be paid in-
lieu of land dedication, that fee shall be equal to the acreage of land which would
otherwise be required to be dedicated, multiplied by the fair market value per acre as ti9
established by periodic appraisal prepared by the City; and
WHEREAS, the City has retained a qualified appraiser to update and establish
the fair market value per acre; and
WHEREAS, the results of the appraisals of two park sites in the City have
established an average value of $3,250,000 as the fair market value per acre; and
WHEREAS, said fair market value would establish an In -Lieu Park Dedication
Fee of $33,962.50 per new residential unit created by an approved subdivision; and
WHEREAS, Resolution 88 -12 previously established the fair market value per
acre to be used in computing In -Lieu Park Dedication Fees, and said Resolution is to be
hereby superseded and rescinded; and
WHEREAS, the City Council has reviewed the appraisal reports and determines
the average fair market cost per acre to be appropriate,
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
A
City of Newport Beach
City Council Resolution No. _
Paoe 2 of 2
Section 1: To establish the amount of $3,250,000 as the fair market value per acre
to be used in assessing In -Lieu Park Dedication Fees pursuant to Chapter 19.52 of the
Newport Beach Municipal Code.
Section 2: To keep current with property appreciation, said fair market value per
acre shall be reviewed and adjusted, if necessary, at least every three (3) years from the
date of adoption of this Resolution.
Passed and adopted by the City Council of the City of Newport Beach at the regular
meeting held on the 27 day of February, 2007
i
ATTEST:
CITY CLERK
AYES, COUNCIL MEMBERS
NOES, COUNCIL MEMBERS
ABSENT COUNCIL MEMBERS
Attachment B
Chapter 19.52 of the
Subdivision Code (Park
Dedications and Fees)
x
CHAPTER 19.52
• PARK DEDICATIONS AND FEES
Sections:
19.52.010
Purpose and Intent
19.52.020
Applicability
19.52.030
Use of Park Dedications and Fees
19.52.040
Parkland Standard
19.52.050
Determination of Land or Fee
19.52.060
Dedication of Land
19.52.070
Fee in Lieu of Dedication
19.52.080
Credit for Private Recreation Facilities
19.52.090
Timing of Dedications and Fees
19.52.010 Purpose and Intent (66477)
This Chapter is intended to provide for the dedication of land, the payment of fees in lieu
thereof, or a combination of both, for park or recreational purposes in conjunction with
the approval of residential development. These provisions are in accordance with the
Recreation and Open Space Element of the General Plan and with Section 66477 of the
Subdivision Map Act (known as the "Quimby Act ").
19.52.020 Applicability (66477)
A. Applicabilit}+. The provisions of this Chapter shall apply to all residential
subdivisions except those exempted per Paragraph B of this Section.
B. Exemptions. The provisions of this Chapter shall not apply to
nonresidential subdivisions, nor to condominium projects or stock
cooperatives which consist of the subdivision of air space in an existing
apartment building which, at the time of tentative map filing, is five or
more years old when no new dwelling units are added.
1952.030 Use of Park Dedications and Fees (66477)
A. Rules for Use of Dedication and Foes. The following rules shall apply to
the use of dedicated park land and in -lieu fees per Section 66477 of the
Subdivision Map Act:
W
The land, fees, or combination thereof shall be used only for the
purpose of developing new or rehabilitating existing neighborhood •
or community park or recreational facilities to serve the
subdivision.
2. The park and recreational facilities provided for by the land
dedications and/or in -lieu fees are in accordance with the policies
and standards contained in the City's General Plan Recreation and
Open Space Element.
3. The amount and location of land to be dedicated or the fees to be
paid shall bear a reasonable relationship to the use of the park and
recreational facilities by the future inhabitants of the subdivision.
4. The City shall develop and maintain a schedule specifying how,
when, and where it will use the land or fees, or both, to develop
park or recreational facilities to serve the residents of the
subdivision. This schedule is provided for in this Chapter and in
the adopted City Council policy entitled "Park Fee Policy".
B. Credit for Improvements. If a subdivider provides park and recreational
improvements to dedicated parkland, the value of the improvements,
together with any equipment located thereon, shall be a credit against the
payment of fees, or dedication of land, required by this Chapter.
•
1952.040 Parkland Standard (66477)
Per figures from the 2000 federal census and the City's Recreation and Open Space
Element, the amount of neighborhood and community park acreage in the City is 5.1
acres per 1,000 population. Per Section 66477 of the Subdivision Map Act, the City may
'use its existing parkland ratio, based on data from the most recent available federal
census, as its park dedication standard for new subdivisions, provided required
dedications do not exceed 5 acres per thousand persons residing within a subdivision.
Therefore, the City's park dedication standard shall be 5 acres per thousand population.
19.52.050 Determination of Land or Fee
The tentative map decision- making body shall determine whether land dedication; in -lieu
fee, or a combination of the two shall be required in conjunction with its approval of a
tentative map in accordance with the following criteria.
A. Land Dedication. The following criteria shall be used in making a
determination to require land dedication: 4
ib
•
t
1. General Plan. Whether a park site is shown within the subdivision
in the General Plan's Recreation and Open Space Element.
2. Accessibility. Whether the proposed site has access to a public
street.
3. T000axarhv. Whether the terrain of the proposed site is suitable for
the intended park development.
B. In -Lieu Fee. If no park or recreational facility has been designated in the
General Plan's Recreation and Open Space Element to be located within
the proposed subdivision, or if the proposed subdivision contains 50 lots
or less, the subdivider shall pay a fee in lieu of land dedication, except that
when a condominium project, stock cooperative, or community apartment
project exceeds 50 dwelling units, dedication of land may be required
notwithstanding that the number of parcels may be less than 50. The in-
lieu fee shall be equal to the value of the amount of land prescribed for
dedication pursuant' to Section 19.52.060. The fee amount shall be
determined in accordance with Section 19.52.070.
C. Both Dedication and Fee. In subdivisions of more than 50 parcels, the
tentative map decision- making body may require the subdivider to both
dedicate land and pay a fee in lieu thereof in accordance with the
following criteria:
When a park site shown within a proposed subdivision is smaller
in area than the acreage which is required for dedication pursuant
to Section 19.52.060, such park site shall be dedicated for park
purposes and a fee, computed pursuant to Section 19.52.070, shall
be paid for the remaining acreage which would have been required
to be dedicated.
2. When a major part of a park or recreational site has already been
acquired by the City and only a .small portion of land is needed
from the subdivision to complete the site, such remaining portion
shall be dedicated and a fee, computed pursuant to Section
19.52.070, shall be paid for the remaining acreage which would
have been required to be dedicated.
Any in -lieu fees paid per the preceding criteria shall be used for the
improvement of the park and recreational site dedicated by the subdivider
or for the improvement of other local parks and recreational facilities
serving the subdivision.
19.52.060 Dedication of Land (66477)
Where a park or recreational facility has been designated in the General Plan's
Recreation and Open Space Element to be located in whole or in part within the proposed
subdivision, the tentative map decision- making body may require the subdivider to
dedicate land for the park per the parkland dedication standard of Section 19.52.040. The
amount of land to be dedicated shall be computed as follows:
A. Persons per Dwelling Unit. The City shall determine the average number
of persons per dwelling unit for each dwelling unit type, based upon the
average household size for that dwelling unit type (e.g. single family
detached, apartment, etc.). Data from the most recent available federal or
state census shall be used to make this computation unless the City
determines that there is substantial evidence to support a finding that a
different household size is appropriate for some or all of the dwelling units
proposed;
B. Computation of Dedication Acreage. The number of persons to occupy the
new subdivision shall be computed by multiplying the average number of
persons per dwelling unit by the number of dwelling units. The parkland
to be dedicated shall then be determined by multiplying the number of
persons by 5 acJ1,000 persons. (For example, if the new subdivision will
house 500 persons: 500 x 511000 = 2.5 acres of land to be dedicated).
1952.070 Fee in Lien of Dedication (66477)
A. Computation of Fee Where a fee is required to be paid in lieu of land
dedication, such fee shall be computed by multiplying the acreage of land
which would otherwise have been required to be dedicated pursuant to
Section 19.52.050 times the fair market value per acre, as established by
periodic appraisal prepared by the City.
B. Use of Money. The in -lieu fees collected pursuant to this Chapter shall be
used only for the purpose of developing new or rehabilitating existing park
or recreational facilities which serve the subdivision, either by way of the
purchase of land for park purposes or, if the City Council determines that
there is sufficient land available, for the improvement of such land for
park and recreational purposes.
C. Time Limits. Any fees collected pursuant to this Chapter shall be
committed within five years after the payment of such fees, or the issuance
of building permits on one -half of the lots created by the subdivision,
whichever occurs later. If such fees are not committed, they shall be
distributed and paid to the record owners of the subdivision in the same
proportion that the size of their lot been to the total area of all lots within
the subdivision.
17
• D. Use of Interest. Any interest earned on the accumulated in -lieu fees may
be used for the maintenance of any existing park or recreational facilities.
19.52.080 Credit for Private Recreational Facilities (66477)
A. Authority to Grant Credit. The tentative map decision - making body may
grant credit for private recreational facilities provided within common
interest developments, as defined in Section 1351 of the Civil Code,
against required land dedications or in -lieu fees in accordance with the
provisions of this Section.
B. Standards for Granting Credit. In approving credit for private recreational
facilities against required park fees, the tentative map decision - making
body shall find that all of the following standards are met:
1. The credited private recreational facilities include active recreation
facilities such as playfields, turfed play areas, tot lots, recreation
buildings, swimming pools and playing courts, and similar
facilities. Also eligible are bicycle or hiking trails which are
privately maintained, which connect to trails outside the
development, and which are open to the public. Passive open
space, such as setback areas and passive greenbelts shall not be
granted credit.
2. The private recreational facilities are suitable for use for active
recreational purposes, taking into consideration such factors as size,
shape, topography, access, and location.
3. The use of the private recreational facilities is restricted to park,
recreation, or trail purposes and their private ownership and
maintenance are assured by recorded covenants which run with the
land and which cannot be eliminated without the consent of the City.
C. Amount of Credit. Credit granted for private recreational facilities shall be
from 0 to 20 percent of the amount of required land dedication or in -lieu
fee imposed pursuant to this Chapter. In no case shall credit exceed 20
percent. The amount of credit granted shall be determined by the tentative
map decision- making body in accordance with the following criteria:
1. The degree to which the private recreational facilities complement
existing or proposed public park facilities serving the subdivision, as
shown in the General Plan's Recreation and Open Space Element. •
2. The degree to which the private recreational facilities reduce the
burden on existing or proposed public park facilities serving the
subdivision.
19.52.090 Timing of Dedications (66477.1)
Land dedications shall be offered at the time of final map filing, either on the final map itself
or by separate instrument. The City Council shall accept, accept subject to improvement, or
reject the offer of dedication at the time of final map approval.
�s
04
Qw
Attachment C
Tables
CONIPARTIVF PARK FFFS . ORANGE COUNTY CITIES
Costa Mesa ISIngle Family Dwelli $13,572 jJuly 2005 __ 14.26 acres
MuM-F mily DMIln $13,829
Dana Point
North of SeNa Road $9,300 March 1995 5 acres _
250.0001
South of SeNa Road $10,540 _
rda
Ca istrano Beach $9,920
Seal Beach
Subdivisions of less than 50 units $10,000 December 2004 5 acres
Effective July 16, 2007
EASTBLUFF PARK APPRAISALS 1979 -2006
•
I/
1979
250.0001
$162,22,
rda
1981
$4.140,0001
$298,486
84.00%
1984
$6,200.0001
$447,008
49.80%
1987
$8,500,000
$612,8331.
37.10%
2006 current appraisal)
$41,610,000
$3,000,000
389.52%
•
I/
" RECEI ED AFTER AG NO
March 9, 2007
PRI ::TED:" Jk
The Honorable Steven Rosansky
Mayor
City of Newport Beach
3300 Newport Blvd.
Newport Beach, CA 92663
10)7 Nk -9 Ph 3- 52
RE: Public Hearing Item. 18 In -Lieu Park Dedication Fee Adjustment
Dear Mayor Rosansky,
On behalf of the membership of the Building Industry Association of Southern
California, Orange County Chapter (BIA /OC), I appreciate the opportunity to
comment on public hearing Agenda Item 18 the In -Lieu Park Dedication Fee
Adjustment.
The members of the BIA /OC are very concerned by the staffs proposal to
dramatically increase the fee by more than 475 %. This is a staggering proposal
that will have immediate negative affects on new home construction
throughout the city.
4�The BIA /OC has expressed our opposition to such an enormous increase that
appears to be based solely on arbitrary land appraisals. There are many other
factors that are considered part of the standard practice methodology used to
determine a "fair share" contribution that will be imposed on the future
residents of Newport Beach.
Recently members of the BIA were able to meet with city staff to discuss our
concerns. During that meeting several questions were raised. The following
is a list of issues and questions raised by affected stakeholders.
Ratio Calculations and Assumptions
1. What is the actual description of lands within the City that have been
used for the current ratio calculation?
a. Does the city include the state, county, school district, and
privately owned lands including beaches made available to the
public that are within the city boundaries? Also, the
government code actually specifically calls out "community
gardens" to be included in the calculation. Were community
• gardens figured into the calculations?
Orange County
Chapter
Building Industry . Association
of Southern Cali forma
17744 Sky Park Circle
Suite 170
Irvine, California 92614
949.553.9500
fax 949.553.9507
www.biaoc.com
PRESIDENT
TIM MGSUNAS
THE SHOPOFF GROUP
VICE PRESIDENT
DAVID GREMINGER
FIELDSTONE COMMUNITIES
Y° VICE PRESIDENT
PAUL JOHNSON
RANCHO: MISSION VIEJO
TREASURER
DEBRA PEMBER
JGHNLAINGHOMES
SECRETARY
DAVE BARTLErr
BROOKFELDHOMES
IMMEDIATE PAST PRESIDDENr
TOM GRABLE
WILLIAM LYON HOMES
TRADE CONTRACTORS ALLIANCE VP
JIMYATES
GOLDEN WEST PLUMBING
ASSOCIATE VICE PRESIDENT
LAER PEARCE
LAER PEARCE d ASSOCIATES
MEMBERAT4ARGE
BILL WATT
BAYWOOD DEVELOPMENT
MEMBER- AT4ARGE
AJNDYBERNSTEIN
JACKSON DEMARCO.
TIDt1S H PECKENPA"
KRISTINE THALMAN
CHIEF EXECUTIVE OFFICER
2. Ratio: The NB ordinance indicates the ration of parkland as of the 2000
census is 5.1 acres per 1,000 population. Does this figure include •
recently dedicated open space from The Irvine Company in the
Newport coast?
a. Has the city checked that the 2000 census number is correct as it
must be used to set the limits of the new ratio? As the
government code reads:
However, the dedication of land, or the payment of fees, or both, shall not exceed the
proportionate amount necessary to provide three acres of park area per 1,000 persons
residing within a subdivision subject to this section, unless the amount of existing
neighborhood and community park area, as calculated pursuant to this subdivision,
exceeds that limit, in which case the legislative body may adopt the calculated amount
as a higher standard not to exceed five acres per 1,000 persons residing within a
subdivision subject to this section.
Land Valuation and Appraisal Method
3. Because there is very limited flat undeveloped space in the city that
could be developed, staff has determined that the fair market value is
around $3 Million per acre. The truth when it comes to parkland
however, is that the parks can be located on lands that are not
"buildable" due to soils issues, right of ways, easements etc.
Accordingly, opportunities for the city to increase its parkland may
be found in "distressed" pieces of property that the city will not pay
premium dollars for. Were any of these types of opportunities
addressed in staff's initial assessment?
Nexus and Projected Expenditures
4. While there seems to bean argument that the amount and location of
land to be dedicated or the amount of fees to be paid MUST bear a
reasonable relationship to the projected use of the park and recreational
facilities by the inhabitants of the subdivision. there is decisional
authority establishing the right to use the money for facilities that are
not located in the subdivision or set aside exclusively for the
subdivision .... problem arise when the new facility bears no
relationship to the inhabitants of the new subdivision. See - Grupe V.
California Coastal Commission (1985) 166 CAM 148.
• When dealing with a fee increase of this magnitude, it is important to fully
examine all components and potential alternatives. Due to the complexity
and the numerous unanswered questions of this particular issue, the
BIA/OC respectfully requests that the City Council continue Item 18 for 30
days to allow staff the time to address stakeholder questions and concerns.
The BIA/OC is confident that adjustments to the current methodology will
lead to a reasonable compromise that will benefit both current and future
residents of Newport Beach. To that end, we look forward to working with
the City in the near future.
Thank you for your thoughtful consideration.
All the Best,
Kristine E. Thalman
Chief Executive Officer
Cc: City Council
City Manager
Apr.04 07 12:44p Dwight Decker 949 -483 -6284 p.1
COUNCIL AGEN A
NO - y o7
• I j _ _ Ow70ht W. Decksr, F%Z.
CI airmw and Chief Executl%re Officer
April 4, 2007 VIA FACSIMILE: 949.644.3020 & U.S. MAIL
Mr. Homer Bludau
City Manager
City of Newport Beach
P.O. Box 1768
Newport Beach, CA 92663 -3384
SUBJECT- Request for 30 -Day Continuance of "In Lieu Park Fee" Agenda Item
Dear Mr. Bludau,
The purpose of this letter is to request a thirty -day continuance of the proposed "In Lieu
Park Fee" agenda item.
We are compiling information for the purpose of working with staff on this matter. The
information will not be completed until next week, after the April 10, 2007, City Council
meeting.
Our Conexant team would like to meet with staff to review the information and to
continue to work on this important agenda issue.
I appreciate your consideration of this request.
Sincerely,
Dwi W.
Chairman and CEO
Conexant Systems, Inc.
CONEkANT SYSTEMS. INC. • 4000MeCArthUf BMd. iwsst limed . NewpOrl Beach. CA 92680
Tat 949A83.8551 . Fax 949.403.4378 • dwig%xbckeACOnezanccom
04/04/2007 14:50 FAX 949 349 0893 LENNAR'SOUTHCOAST 0002/002
April 4, 2007
Ka Facsimile: 949.644.3020 & U.S. Matt
Mr. Homer Bludau
City Manager
City of Newport Beach
P.O. Box 1768
Newport Beach, CA 92663 -3384
Subject: Request for 30 Day Continuance of In Lieu Park Fee issue
Dear Mr. Bludau:
The purpose of this letter is to request a thirty day continuance of the proposed In Lieu Paris Fee
agenda item.
We are developing some information for the purpose of working with staff on this matter. The
information will not be completed until next week, after your city council meeting.
When we receive this information we would like to meet with staff and continue to work on this
important issue.
I appreciate your consideration of this request.
Sincerely,
d
A
Vice President, Comm . Development
25 Enterprise. Alien Viejo, CA 02656 - Phone; 04944968200 - Fax: 949 - 549.1782
LEN NAfl.COM la
The Koll Company
• 4343 Von Karman Avenue
suite ISO
Newport Beach, CA 92660
i (949) 833:3030
(949) 2564344 Fax
April 4, 2007
Homer Bludau
City Manager
City of Newport Beach
P.O. Box 1768
Newport Beach, CA 92663 -3384
VIA FACSIMILE: 949.644.3020 & U.S. MAIL
SUBJECT: Request for 30 Day Continuance of In Lieu Park Fee Issue
Dear Mr. Bludau,
The purpose of this letter is to request a thirty day continuance of the proposed In Lieu
Park Fee agenda item.
We are developing some information for the purpose of working with staff on this matter.
The information will not be completed until next week, after your city council meeting.
When we receive this information we would like to meet with staff and continue to work
on this important issue.
I appreciate your consideration of this request.
Sincerely,
Scott Meserve
Development Manager
The Koll Company
APR /05 /2007 /THU 08:57 AM cherokee investment FAX No,303 689 1461 P.002
NEWPORT BANNING RANCH, LLC •
April 4, 2007
Homer Bludau
City Manager
City of Newport Beach
P.O. Box 1768
Newport Beach, CA 92663 -3384
VIA FACSIMILE: 949.644.3020 & U.S. MAIL
SUBJECT: Request for 30 Day Continuance of In Lieu Park Fee Issue
Dear Mr. Bludau,
The purpose of this letter is to request a thirty day continuance of the proposed In Lieu
Park Fee agenda item.
We are developing some information for the purpose of working with staff on this matter.
The information will not be completed until next week, after your city council meeting.
When we receive this information we would like to meet with staff and continue to work
on this important issue.
I appreciate your consideration of this request.
Smcerel
Andy Stewart
Cherokee Investment Partners, LLC
Newport Banning Ranch, LLC
CITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. ,
May 8, 2007
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Planning Department
Brandon Nichols, Associate Planner
(949) 644 -3234, bnichols @city.newport - beach.ca.us
SUBJECT: In -Lieu Park Dedication Fee Adjustment
Appraisal of Eastbluff and Bob Henry Park
ISSUE
Should the City Council increase the City's In -Lieu Park Dedication Fee by adjusting the
fair market land value per acre used in the fee calculation?
RECOMMENDATION
Adopt the attached City Council Resolution adjusting the fair market land value per acre
that is used to establish the In -Lieu Park Dedication Fee (the "In -Lieu Fee ") to
$2,500,000 (Attachment A)
BACKGROUND
This item was originally scheduled for the February 27, 2007, City Council Meeting. The
item was continued to the following meeting in response to a request from the Building
Industry Association (BIA) for additional time to evaluate the proposed In -Lieu Fee
adjustment. Subsequent continuances were granted by the Council to allow the BIA
time to work with City staff and formulate their comments. The original staff report
explains how the fee is calculated pursuant to the requirements of State law and the
City's subdivision code.
On April 12, 2007, the City received BIA comments on the proposed In -Lieu Fee
adjustment. To allow City staff adequate time to evaluate and respond to the comments,
the item was continued to this date.
In -Lieu Park Dedication Fee Adjustment
May 8, 2007
Page 2
DISCUSSION
BIA Comment Letter
In response to the City's original Park In -Lieu Fee proposal, the BIA submitted a study
prepared by the appraisal and consulting firm of Waldron and Associates, Inc. The study
is attached for reference (Attachment B). The study contained the following sections:
• A review of the two parkland appraisals that were used by the City as the
basis for determining the proposed In -Lieu Fee
• A review of existing parkland conditions reflected in the City's Recreation
and Open Space Element
• A discussion of alternative methodology to establish the fee based upon
parkland sales
The first section of the study focused on the appraisal reports prepared by the firm of
Reinhart- Fontes Associates Inc. The appraisals were commissioned by the City to
determine the fair market value of residential land in Newport Beach. Fair market land
value is a factor used to establish the In -Lieu Fee. The study concluded that the
appraisals overstated the value of the land appraised and that reliance on the appraisals
would result in an inflated In -Lieu Fee. According to the study, the appraisal reports
overvalued the properties being appraised for the following reasons:
• A comparable sales used for the appraisals were identified as unentitled
when they were in fact entitled; land entitlement can increase the value of
a property by up to 40 %; adjustments to the comparable sales had not been
made to compensate for this factor
• The property being appraised was assumed to have a maximum
development density of 10 units per acre; comparable sales used for the
analysis had a higher potential development density than the property
being appraised; higher development densities can increase the value of a
property; adjustments to the comparable sales had not been made
compensate for this factor
• One of the comparable sales used in the analysis was a mobile home site;
use of this site as a comparable sale was questioned.
The report also concluded that the appraiser did not account for the decline in residential
sales and price trends evidenced by a study of Fourth Quarter 2006 residential market
trends in Orange County. This information was not available as of the effective date of
the appraisal (November 7, 2006) and, therefore, could not have been included in the
analysis.
The City reviewed the appraisal comments and forwarded them to Reinhart- Fontes
Associates for their consideration. Reinhart- Fontes determined that inaccurate
In -Lieu Park Dedication Fee Adjustment
May 8, 2007
Page 3
information had been provided by persons contacted as part of the appraisal process. The
appraiser determined that adjustments were merited and made the following
modifications to the comparable sales used in the report:
• One comparable sale, located in the City of Stanton, was removed from
the analysis
• One comparable sale, located in the City of Newport Beach, was added to
the analysis
• The mobile home site was removed from the analysis
• Entitled sites received a downward price adjustment of 40%
• All sites were adjusted downward for density
It is staffs determination that the adjustments adequately address the appraisal comments
set forth in the BIA comment letter. The table below summarizes the results of the
revised appraisals and the resultant In -Lieu Fee.
REVISED APPRAISAK RESULTS AND IN -LIEU FEES
Property
Total Value
Cost Per Acre
In -Lieu Fee Per Unit
Eastbluff Park
$31,200,000
$2,250,000
$23,512
Bob Henry Park
$13,200,000
$2,750,000
$28,737
Average both sites
52,500,000
$26,125
The BIA also questioned the need for levying In -Lieu Fees when the City's existing
parkland ratio exceeds the park dedication requirement of 5 acres per 1000 persons. The
BIA incorrectly interpreted the parkland dedication ratio to mean that the City has
determined that 5 acres of parkland per 1000 persons is adequate to serve the recreational
needs of all City residents.
The 5 acre per 1000 ratio is a parkland dedication requirement for new residential
development. The ratio is set forth in State law known as the Quimby Act. Pursuant to
the Act, the City may require a maximum of 5 acres per 1000 persons only if the City's
existing parkland ratio exceeds that rate. The fact that the City's parkland ratio exceeds 5
acres per 1000 persons is important only in that it allows the City to require the maximum
parkland dedication under the Quimby Act. The City's dedication requirement is a
function of State law. It is not a policy statement that 5 acres per 1000 persons is
adequate for the City of Newport Beach.
It also should be noted that the recently approved General Plan allows for new residential
development in the City. The Environmental Impact Report for the General Plan cited
the City's parkland dedication requirement of 5 acres per 1000 new residents as a factor
that would avoid impacts of new residential development on existing park and
recreational facilities.
In -Lieu Park Dedication Fee Adjustment
May 8, 2007
Page 4
Finally, the BIA suggests an alternative methodology for determining the fee using
amounts other cities have paid for acquisition of parkland. This approach is inconsistent
with the requirements of the Quimby Act and the City Subdivision Code. As previously
stated, land costs vary widely across jurisdictions. The land prices in other jurisdictions
are not relevant when considering a fee for acquisition of land in Newport Beach.
Park Fee Comparisons
In previous correspondence, the BIA expressed concern that the proposed In -Lieu Fee
exceeded the County average. This comparison is problematic for a number of reasons..
First, the proposed In -Lieu Fee is intended to be representative of the cost of acquiring
land in Newport Beach. County averages, and fees charged by other jurisdictions, are
not relevant since very few County jurisdictions have average land values comparable
to Newport Beach.
Attention must also be paid to when cities last updated their In -Lieu Fees. In -Lieu Fees
should be continually adjusted to keep pace with property appreciation. Escalations in
property values during the recent real estate "boom" were unprecedented. Cities that
have not adjusted fees to account for this appreciation have an artificial downward
pressure on the County average.
Finally, individual cities have different park dedication acreage requirements. Since In-
Lieu Fees are computed by multiplying the fair market land value per acre by the city's
acreage requirement, significant variations in fees result. This again decreases the
utility of using a county average as a tool for comparing In -Lieu Fees.
For reference, staff has compiled a table summarizing information on acreage
requirements, In Lieu Fees and date of last update for a number of Orange County
Cities. (Attachment C)
Second BIA Comment Letter
In response to the updated appraisals the BIA submitted a second comment letter that
has been attached for the Council's consideration (Attachment D).
CONCLUSION
Based upon the results of the revised appraisals, staff recommends using the average
fair market land value of $2,500,000 per acre to calculate In -Lieu Fees. If the City
Council concurs with the results of the revised appraisals, a resolution has been
prepared establishing a fair market land value of $2,500,000 per acre. This figure
results an In -Lieu Fee of $26,125 per new residential unit.
In -Lieu Park Dedication Fee Adjustment
May 8, 2007
Page 5
ALTERNATIVE
Previous updates of the Park In -Lieu fee were based solely on the appraisal of Eastbluff
Park. The current analysis included Bob Henry Park in an attempt to provide a better
representation of average fair market value. Consistent with previous practice, the
Council may choose to use only Eastbluff Park as the basis for establishing the In -Lieu
Fee. This would establish the fair market land value at $2,250,000 per acre and would
result in an In -Lieu Fee of $23,512 per new residential unit.
Prepared by:
Brandon Nichols, Associate Planner
Attachments
A. Draft Resolution
B. BIA Comment Letter
C. Park Fee Table
D. Second BIA Comment Letter
Submitted by:
Jn 2D. Wood, AssistantlVity Manager
Attachment A
Draft Resolution
Me
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT
BEACH ESTABLISHING .THE FAIR MARKET VALUE PER ACRE TO
BE USED IN ASSESSING IN -LIEU PARK DEDICATION FEES
PURSUANT TO SECTION 19.52.070 OF THE NEWPORT BEACH
MUNICIPAL CODE AND RESCINDING RESOLUTION NO. 88 -12
WHEREAS, Chapter 19.52 of the Newport Beach Municipal Code establishes a
parkland dedication standard of five (5) acres per thousand population expected to
reside in new residential subdivisions; and
WHEREAS, in subdivisions containing 50 lots or less, the subdivider may pay
an in -lieu fee equal to the value of land required for dedication; and
WHEREAS, in subdivisions containing more than 50 lots, the decision making
body may require land dedication, in -lieu fee, or a combination of the two; and
WHEREAS, Chapter 19.52 establishes that when a fee is required to be paid in-
lieu of land dedication, that fee shall be equal to the acreage of land which would
otherwise be required to be dedicated, multiplied by the fair market value per acre as
established by periodic appraisal prepared by the City; and
WHEREAS, the City has retained a qualified appraiser to update and establish
the fair market value per acre; and
WHEREAS, the results of the appraisals of two park sites in the City have
established an average value of $2,500,000 as the fair market value per acre; and
WHEREAS, said fair market value would establish an In -Lieu Park Dedication
Fee of $26,125 per new residential unit created by an approved subdivision; and
WHEREAS, Resolution 88 -12 previously established the fair market value per
acre to be used in computing In -Lieu Park Dedication Fees, and said Resolution is to be
hereby superseded and rescinded; and
WHEREAS, the City Council has reviewed the appraisal reports and determines
the average fair market cost per acre to be appropriate,
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
rA
City of Newport Beach
City Council Resolution No.
Page 2 of 2
Section 1: To establish the amount of $2,500,000 as the fair market value per acre
to be used in assessing In -Lieu Park Dedication Fees pursuant to Chapter 19.52 of the
Newport Beach Municipal Code.
Section 2: To keep current with property appreciation, said fair market value per
acre shall be reviewed and adjusted, if necessary, at least every three (3) years from the
date of adoption of this Resolution.
Passed and adopted by the City Council of the City of Newport Beach at the regular
meeting held on the 8t' day of May, 2007
u_ eR
ATTEST:
CITY CLERK
AYES, COUNCIL MEMBERS
NOES, COUNCIL MEMBERS
ABSENT COUNCIL MEMBERS
G]
Attachment B
BIA Comment Letter
April 6, 2007
Honorable Steve Rosansky
Mayor
City of Newport Beach
3300 Newport Blvd
Newport Beach, CA 92663
Re: In -Lieu Park Dedication Fee Adjustment
Dear Mayor Rosansky:
As you know, the Building Industry Association (BIA) has expressed concerns regarding the proposed
increase in the In -Lieu Park Dedication Fee Adjustment because of our mission to encourage policies
and practices that support new home construction. We have appreciated the continuance ofyour
hearings on this matter to allow our industry membership to assess the methodology used by the City
to establish your new fee.
In an effort for our membership to better understand the city's appraisals which were the basis for
establishing the fee increase, we engaged the services of an appraiser who has prepared the enclosed
report for your review and consideration. We have found as a result of this thoughtful analysis, that
there is reason for the City to consider a lower fee. We respectfully request your consideration of this
infomTation in the hope that a reasonable compromise can be reached that will benefit both current and
future residents of the City of Newport Beach. We will look forward to meeting with your staff and
working with the City on this important matter.
All the best,
Kristine E. Thalman ✓✓
Chief Executive Officer
Enclosure
Cc: City Council
City Manager
Orange County
Chapter
14u.f ii1H' il,allJUl A$or.mla -n
01 Sv..ihem CaliC9mia
17744 Sky Park Circle
Suite 170
Irvine, Cali&rmia 92614
949.553.9500
fax 949.553.9507
www.biaoc.com
PRESIDENT
TIM MCSUNA.S
THE SHOPOFT GROUP
VICE PRESIDENT
DAVIDGREMINGER
rIELOSTONE COMMUNIPES
2—VICE PRESIDENT
PAUL JOHNSON
RANCHOMISSYNIVI6;O
TR.F ABURER
OEBRA PEMSER
JOHN LNNG HOMES
SECRETARY
DAVE HARTLEIT
BROOKFIELOHOMES
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TRADF. C!) .NMOORS ALLIANCE. N'
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GOLDEN WEST PLUMONC
ASSOCIATE VICE PRESIDE:Nr
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LAER PENtCE A ASS ;> I:TES
MEMBE247 LARGE
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BAYWOODDEVELOPMENi
MEMBER AT -LARGE
ANDY BERNSTEIN
JACKSON, DCMARCO.
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KRIS UNC THA! MAN
CHIEF EXECUTNE O-EICE2
to
WALDRON 8 ASSOCIATES, INC.
'REAL ESTATE APPRAISERS AND CONSULTANTS
209 SOUTH ORANGE STREET
SUITE 100
ORANGE. CALIFORNIA 92g66
TELEPHONE (714) 771 -1100
FACSIMILE (714) 771 -1120
April 2, 2007
Mr. Bryan M. Starr
Director — External Affairs
Building Industry Association of Orange County
17744 Sky Park Circle
Irvine, California 92614
MICHAEL F. WALDRON. MAI
JANICE K. WALDRON
CHRISTER FIEGE- KOLLMANN
PETROS BERHANE
JAMES M. BIcELOW
KEVIN R. WALDRON
RE: Consultation, Park Dedication — In Lieu Fees, Newport Beach, California.
Dear Mr. Starr:
The Building Industry Association (BIA) has requested consulting services with a focus on a
preliminary study and comment regarding the appraisal bases for regulatory, in -lieu park fees as
proposed by the City of Newport Beach (City). An Executive Summary and a study of the findings
follow.
This is a four part study covering: (1) a review and comment of two appraisals prepared by Mr.
Steven Fontes, MAI at the request of Mr. Dan Trimble, Program Manager, Planning Department for
the City of Newport Beach; (2) a review of the existing conditions as reflected in the Recreation
Element per the City's General Plan; (3) a discussion of an alternative measure to parkland fees
based upon parkland sales, and (4) a summation of the findings and conclusions.
Executive Summary
The City commissioned two appraisals for the purpose of providing a baseline value, which
would be used to establish regulatory, in -lieu park fees. The appraisals, prepared by Mr.
Fontes, not only grossly overstate the value of land appraised, but also are inconsistent with
the actual cost to acquire land for park purposes. Reliance upon these appraisals will
overstate in -lieu park fees.
The City of Newport Beach has recently acquired two sites from the State of California
(Caltrans) for park purposes. The properties are located at the northwesterly comer of W.
Coast Highway and Superior Avenue in Newport Beach. The sites contain approximately
15.05 acres and 2.00 acres. The City reportedly paid $5,000,000 and $175,000, respectively.
This equates to $332,226 per acre and $87,500 per acre, respectively. These rates are
1-
Mr. Bryan M. S t a r r - 2 - April 2, 2007
significantly less than the concluded rates of $3,000,000 and $3,500,000 per acre as
concluded in the City's commissioned appraisals of East Bluff Park and Bob Henry Park,
each prepared by Mr. Fontes. The average price per acre for the combined City purchase of
parkland property is $303,519, about ten percent (10 %) of the purported basis for an
increase of in -lieu park fees.
❖ The appraisal analysis for East Bluff Park and Bob Henry Park is flawed with grossly
inflated value conclusions.
❖ The appraiser has not accounted for the decline in residential sales and price trends.
❖ The appraiser has not appropriately considered entitlement risk.
❖ The appraiser has not made the appropriate downward adjustment for the entitled status in
Sale Nos. 1 and 2, two sales treated as unentitled, when in fact, each sold with entitlements.
Entitlements may contribute as much as forty percent (40 %) of the unit rate.
The appraiser has not made the appropriate downward adjustment for development density.
The average density for all four market data items is 18.65 units per acre, as compared to the
subject properties' assumed 10.units per acre.
❖ Data No. 4 is a listing of an improved mobilehome park, which generates a stabilized
income stream, and assuming some merit with respect to comparability, has not been
considered in the adjustment process.
❖ Cumulatively, these adjustments are substantial and, if applied appropriately, would result
in a rate per acre significantly less than that concluded by the appraiser.
❖ In terms of parkland needs compared to parklands existing, at current population levels,
there appears to be a surplus of parkland acreage with the City's standard of 5 acres per
1,000 population.
❖ If the 58.1 acres within Newport Coast were included in the existing acreage calculation, a
surplus of parkland acreage exists within Newport Beach.
❖ If any of the passive open space or recreational watercourses within Newport Harbor is
included, the surplus becomes substantially greater. The City's standard of 5 acres per 1,000
population is exceeded when Newport Coast's existing parkland is included and is more than
doubled if passive open space and active waterways are included.
❖ On a City -wide basis, a question arises as to the validity of an in -lieu park fee in the
presence of surplus parkland and an abundance of other open space and recreational
watercourses.
❖ If the premise of an in -lieu park fee is to assist the City in its acquisition of land suitable for
park utilization, then one direct measure may be the prices paid by other municipalities and
public entities for their park needs. Statewide, during the last four years, the median
WALDRON & ASSOCIATES, INC.
3
Mr. Bryan M. Starr -3 - April 2, 2007
purchase price of land intended for park purposes clusters around $560,000 per acre. In
Southern California, during the last four years, the median purchase price of land intended
for park purposes clusters around $400,000 per acre. In Orange County, during the last four
years, the median purchase price of land intended for park purposes clusters around
$260,000 per acre with two recent purchases by the City of Newport Beach at rates of
$87,500 per acre and $332,226 per acre.
d+ In summary, the appraisals grossly overstate a rate per acre as the basis for an in -lieu park
fee. There appears to be a surplus of existing parkland throughout the city of Newport
Beach, calling into question a need for an in -lieu park fee, let alone an increase in fees. The
prices paid by other municipalities within the past four years, including the City of Newport
Beach, appear to be less than $400,000 per acre, which is less than one -third of the rate
concluded in the Fontes' appraisals.
I - CUp's Appraisal Bases for Increasine In -Lieu Park Fees
Two (2) separate appraisal reports prepared by Steven Fontes, MAL CCIM of Reinhart- Fontes
Associates, Inc. cover the appraisal of two (2) existing parks, East Bluff Park and Bob Henry Park.
Each of the appraisals carries a report date of November 30, 2006 and a date of valuation of
November 7, 2006. Among other standard assumptions and limiting conditions, each appraisal
contains a prominent directive and assumption that appears in seven (7) citations throughout the
twenty -eight (2 8) page report for the Bob Henry Park site and twenty -nine (24) page report for the
East Bluff Park site:
"The client requested that the subject property be appraised assuming the site were
vacant unimproved residential land at a 10 unit per acre density. Therefore, none of
the park equipment or improvements was considered in this analysis. The subject is
appraised on an unentitled basis. In addition, I was to assume that no future lots
would have view potential, that the sites were nearly level, that the property had
utilities available. "
The magnitude of this assumption is revealed in the reality of the zoning and land use designations
for each of the subject properties. In contrast, each of the properties, appraised in this hypothetical
condition, carries an open space land use designation, which would prohibit residential development
of this type and scale.
An abbreviated discussion and comment for each of the appraisals follows. Although nearly
redundant, the discussion is repeated for the Bob Henry Park appraisal in order to maintain the
integrity of the independent analyses.
East BluffPark
• East Bluff Park is located on the west side of Vista Del Oro at the Vista Del Sol intersection
in the East Bluff neighborhood of Newport Beach. The park contains 13.87 acres and is
identified by the Orange County Assessor as APN 440 - 161 -01. If developed under the
hypothetical, the site is an infill location surrounded by a homogeneous residential
community of mixed product served by local streets. This general location is best
WALDRON & ASSOCIATES, INC.
14
Mr. Bryan M. S t a r r - 4 - April 2, 2007
characterized as being east of Back Bay with proximity to the prominent nearby residential
neighborhoods of East Bluff, One Ford Road, Belcourt Estates, Big Canyon and Harbor
View.
• Page 6 — The appraiser remarks that a Cost Approach was not employed, admitting that land
sales were almost non - existent due to the built up nature of the area. This weakens locational
comparability.
Page 17 — The appraiser makes an erroneous remark, commenting that ... "The subject is an
multi- tenant building." According to the stated hypothetical condition, the subject is as
assumed, vacant, unentitled residentially zoned land, available for a development density of
ten (10) units per acre.
Page 21 — The appraiser assumes that a residential development is feasible for purposes of
the analysis. This assumption avoids addressing current market conditions where lackluster
residential development and sales activity have declined significantly in the market.
Nationally, residential building permits have continued to decline over the last month in
March 2007. According to Hanley Wood Market Intelligence, a leading provider of
consulting services for residential new -home construction to the homebuilding industry, The
Fourth Quarter of 2006 in Orange County reflects the following:
Sales by Quarter
• In the fourth quarter of 2006, homebuilders sold 926 new homes in Orange County,
a decrease of 30% from 1,315 new homes sold in the same period last year.
• There were 315 newly -built detached homes sold in the fourth quarter, a decrease of
25% from 422 sold in the same period last year.
• In the 'fourth quarter there were 611 newly -built attached homes sold in Orange
County, a decrease of 32% from 893 sold in the same period last year.
Sales by Year
• There were 3,765 new homes sold in Orange County in 2006, a 35% decline from
the same period last year.
• Year -to -date, detached sales have decreased to 1,324 homes, a 51% drop from the
same period last year.
• There were 2,441 attached new homes sold to date, a 22% decline from the 3,131
attached sales seen the 'same period last year. The Coastal North submarket, which
includes Newport Beach, saw the largest decrease of 93% in attached sales.
Sales Absorption
• Detached monthly sales rates for active detached projects came to 1.8 in 2006, a
decrease of 50% from 3.6 sales per project in 2005.
• Absorption for attached product in all active projects decreased 39% from 2005 to
4.9 monthly sales per project in 2006.
WALDRON & ASSOCIATES, INC.
15
Mr. Bryan M. Starr -5 - April 2, 2007
Median Price Trends
o Detached median prices for single family homes in Orange County came to
$1,055,980 in the fourth quarter of 2006, a decrease of 11% from the same period
last year.
o The median sale price of attached homes in Orange County increased 9% in the
fourth quarter to $470,000 with the Coastal North submarket, which includes
Newport Beach, at $830,000.
Unsoldinventory
o There were 2,741 units of total unsold detached inventory at the end of the fourth
quarter, up 1,137 units from the same time last year. Total unsold detached inventory
represents 24.8 months of relative supply at current sales rates.
o There were 3,588 units of total unsold attached inventory at the end of the fourth
quarter, equating to 17.6 months of relative supply at current sales rates.
• Page 21 — The appraiser concludes to a highest and best use for ... "immediate residential
development ". The appraiser does not address the inherent entitlement risk and time
associated with gaining approvals in an established residential neighborhood, including
environmental documentation, traffic studies and likely neighborhood opposition.
• Page 22 — The appraiser states, "Adjustments are only made for those differences that the
market indicates as having an affect on value. After making the appropriate adjustments, an
indication of value for the subject property is derived from the sales comparables."
Adjustments were made for conditions of sale, location, size and shape.
• Page 23 — The appraiser makes reference to "improved project sales" as it relates to the
verification process. The appraiser appears to be referring to a subdivision analysis. None of
the sales is an "improved project sale'.
• Pages 25 — 28 — The appraiser includes three sales and one listing. None of the market data
items is located in Newport Beach. The 'comparable sale" items are represented as
unentitled vacant land. A brief review of the data results in the following observations:
o Sale No. 1 is zoned RM, not R3, within the city of Huntington Beach. This zone will
permit a maximum density of fifteen (15) units per acre, which was subsequently
developed to 13 units per acre. It took the Seller over two years to entitle the
property. The Seller was also responsible for an affordable housing component
offsite. The Seller was responsible for entitling the property and delivered a fully
entitled property, which closed about two weeks before obtaining the final map. This
was verified through the Broker, James Read.
o Sale No. 2 is located within a redevelopment project known as Renaissance Plaza, a
mixed use project. Development density is 16.6 units per acre. The seller was a party
to a Disposition and Development Agreement with the Stanton Redevelopment
Agency. Among other things, this agreement provided for atypical (Non- Market)
WALDRON & ASSOCIATES, MC.
I&
Mr. Bryan M. S t a r r - 6 - April 2, 2007
concessions that were assignable to the Buyer. Furthermore, this property was fully
entitled, included all building plans and was ready for finished grading. This was
verified through the Broker, Michael Hunter and the City's Special Counsel, Mark
Mulkerin.
o Sale No. 3 is reported at a development density of up to 25 units per acre.
Data No. 4 is a current listing with a development density reported at up to 20 units
per acre. It lies within Costa Mesa's "19 West Urban Plan", a mixed use/high density
residential overlay. This is a mobilehome park. The property is improved with 40
mobilehome units and 2 RV units. Two of the units are freestanding houses. The
property is 100% occupied. The owners have reportedly invested over $300,000 in
improvements in the last four years. This listing is advertised as having excellent
income in place. This was verified through listing material. This is not a sale. It may
have a future prospect for mixed use development, however it is improved,
generating an income stream and the owner has continued to invest into the property
for the past four years, placing into question the use of this item as a comparable
land sale.
o As it relates to the four salellisting items, the average development density is 18.65
units per acre, nearly twice that of the directed and assumed development density of
10 units per acre. In the market for vacant residential land, as density increases, price
per acre increases, and conversely, as density decreases, price per acre decreases.
This near doubling of density will have a significant upward influence on rate per
acre.
• Two of the data items involve mixed use land use designations, as compared to the
assumed strictly residential land use. Mixed use developments are more diverse and
presently in higher demand than residential alone. This will have an upward
influence on rate per acre.
• Contrary to the directive and assumed unentitled status of the hypothetical subject
property, two of the sale items are fully entitled, which will significantly influence
the rate per acre upward.
• Perhaps most overwhelming and contrary to the brief statement on Page 23 of the
report regarding appropriate adjustments, on Page 26, the appraiser fails to make
adjustments for development density and entitlements. If adjusted appropriately, the
adjustments for each of these categories would have a profound downward affect on
the adjusted rate per acre.
• The conclusion of a unit rate at $3,000,000 per acre is grossly overstated based upon
the analysis and lack of appropriate adjustment to the market data items.
WALDRON & ASSOCIATES, INC.
tQ
Mr. Bryan M. Starr - 7 - April 2, 2007
Bob Henry Park
Bob Henry Park is located at the northeast corner of Dover Drive and Castaways Lane near
the Dover Shores and Castaways neighborhoods of Newport Beach. The park contains 4.80
acres and is identified by the Orange County Assessor as APN 117 - 801 -15. If developed
under the hypothetical, the site is an infill location surrounded by a mix of commercial,
institutional and residential uses served by a signalized secondary arterial and a local street.
This general location is best characterized as being west of Back Bay with proximity to
nearby commercial uses aligning both Dover Drive and Westcliff Drive (transitions to East
17th Street in Costa Mesa one - quarter mile west of Dover Drive) and the residential
neighborhoods of Dover Shores, Castaways and East Costa Mesa.
• Page 6 — The appraiser remarks that a Cost Approach was not employed, admitting that land
sales were almost non - existent due to the built up nature of the area. This weakens locational
comparability.
Page 17 — The appraiser makes an erroneous remark, commenting that... "The subject is an
multi- tenant building." According to the stated hypothetical condition, the subject is as
assumed, vacant, unentitled residentially zoned land, available for a development density of
ten (10) units per acre.
Page 21 — The appraiser assumes that a residential development is feasible for purposes of
the analysis. This assumption avoids addressing current market conditions where lackluster
residential development and sales activity have declined significantly in the market.
Nationally, residential building permits have continued to decline over the last month in
March 2007. According to Hanley Wood Market Intelligence, a leading provider of
consulting services for residential new -home construction to the homebuilding industry, The
Fourth Quarter of 2006 in Orange County reflects the following:
Sales by 0uarter
• In the fourth quarter of 2006, homebuilders sold 926 new homes in Orange County,
a decrease of 30% from 1,315 new homes sold in the same period last year.
• There were 315 newly -built detached homes sold in the fourth quarter, a decrease of
25% from 422 sold in the same period last year.
• In the fourth quarter there were 611 newly -built attached homes sold in Orange
County, a decrease of 32% from 893 sold in the same period last year.
Sales by Year
• There were 3,765 new homes sold in Orange County in 2006, a 35% decline from
the same period last year.
• Year-to -date, detached sales have decreased to 1,324 homes, a 51% drop from the
same period last year.
• There were 2,441 attached new homes sold to date, a 22% decline from the 3,131
attached sales seen the same period last year. The Coastal North submarket, which
includes Newport Beach, saw the largest decrease of 93% in attached sales.
WALDRON & ASSOCIATES, 1NG.
1�
Mr. Bryan M. Starr - 8 - April 2, 2007
Sales Absorption
• Detached monthly sales rates for active detached projects came to 1.8 in 2006, a
decrease of 50% from 3.6 sales per project in 2005.
• Absorption for attached product in all active projects decreased 39% from 2005 to
4.9 monthly sales per project in 2006.
Median Price Trends
• Detached median prices for single family homes in Orange County came to
$1,055,980 in the fourth quarter of 2006, a decrease of 11% from the same period
last year.
• The median sale price of attached homes in Orange County increased 9% in the
fourth quarter to $470,000 with the Coastal North submarket, which includes
Newport Beach, at $830,000.
Unsold Inventory
• There were 2,741 units of total unsold detached inventory at the end of the fourth
quarter, up 1,137 units from the same time last year. Total unsold detached inventory
represents 24.8 months of relative supply at current sales rates.
• There were 3,588 units of total unsold attached inventory at the end of the fourth
quarter, equating to 17.6 months of relative supply at current sales rates.
• Page 21 — The appraiser concludes to a highest and best use for ... "immediate residential
development ". The appraiser does not address the inherent entitlement risk and time
associated with gaining approvals in an established residential neighborhood, including
environmental documentation, traffic studies and likely neighborhood opposition.
• Page 22 — The appraiser states, "Adjustments are only made for those differences that the
market indicates as having an affect on value. After making the appropriate adjustments, an
indication of value for the subject property is derived from the sales comparables."
Adjustments were made for conditions of sale, location and size.
• Page 23 — The appraiser refers to "improved project sales" as it relates to the verification
process. The appraiser appears to be referring to a subdivision analysis. None of the sales is
an "improved project sale ".
• Pages 25 — 29 — The appraiser includes three sales and one listing. None of the market data
items is located in Newport Beach. The "comparable sale" items are represented as
unentitled vacant land. A brief review of the data results in the following observations:
Sale No. 1 is zoned RM, not R3, within the city of Huntington Beach. This zone will
permit a maximum density of fifteen (15) units per acre, which was subsequently
developed to 13 units per acre. It took the Seller over two years to entitle the
property. The Seller was also responsible for an affordable housing component
offsite. The Seller was responsible for entitling the property and delivered a frilly
WALDRON & ASSOCIATES, INC.
11
Mr. Bryan M. Starr - 9 - April 2, 2007
entitled property, which closed about two weeks before obtaining the final map. This.
was verified through the Broker, James Read.
o Sale No. 2 is located within a redevelopment project known as Renaissance Plaza, a
mixed use project. Development density is 16.6 units per acre. The seller was a party
to a Disposition and Development Agreement with the Stanton Redevelopment
Agency. Among other things, this agreement provided for atypical concessions that
were assignable to the Buyer. Furthermore, this property was frilly entitled, included
all building plans and was ready for finished grading. This was verified through the
Broker, Michael Hunter and the City's Special Counsel, Mark Mulkerin
o Sale No. 3 is reported at a development density of up to 25 units per acre.
Data No. 4 is a current listing with a development density reported at up to 20 units
per acre. It lies within Costa Mesa's "19 West Urban Plan", a mixed use/high density
residential overlay. This is a mobilehome park. The property is improved with 40
mobilehome units and 2 RV units. Two of the units are freestanding houses. The
property is 100% occupied. The owners have reportedly invested over $300,000 in
improvements in the last four years. This listing is advertised as having excellent
income in place. This was verified through listing material. This is not a sale. It may
have a future prospect for mixed use development, however it is improved,
generating an income stream and the owner has continued to invest into the property
for the past four years, placing into question the use of this item as a comparable
land sale.
• As it relates to the four We/listing items, the average development density is 18.65
units per acre, nearly twice that of the directed and assumed development density of
10 units per acre. In the market for vacant residential land, as density increases, price
per acre increases, and conversely, as density decreases, price per acre decreases.
This near doubling of density will have a significant upward influence on rate per
acre.
• Two of the data items involve mixed use land use designations, as compared to the
assumed strictly residential land use. Mixed use developments are more diverse and
presently in higher demand than residential alone. This will have an upward
influence on rate per acre.
o Contrary to the directive and assumed unentitled status of the hypothetical subject
property, two of the sale items are fully entitled, which will significantly influence
the rate per acre upward.
o Perhaps most overwhelming and contrary to the brief statement on Page 23 of the
report regarding appropriate adjustments, on Page 26, the appraiser fails to make
adjustments for development density and entitlements. If adjusted appropriately, the
adjustments for each of these categories would have a profound downward affect on
the adjusted rate per acre.
WALDRON & ASSOCIATES, INC.
Mr. Bryan M. Starr _10- Apri12, 2007
o The conclusion of a unit rate at $3,500,000 per acre is grossly overstated based upon
the analysis and lack of appropriate adjustment to the market data items.
II - City of Newport Beach — General Plan — Recreation Element
The City s General Plan, adopted July 25, 2006, has been reviewed, with specific reference to
Chapter 8, titled 'Recreation Element', described in Pages 8 -1 through 8 -50. Table RI — Parkland
Acreage Needs identifies twelve (12) service areas and a distribution of park acres needed based
upon a city -wide population of 83,120. Assuming a desired parkland ratio of five (5) acres per 1,000
people, 415.6 acres are needed to serve the residents of Newport Beach. In addition to the Park
Acres Needed column, the table identifies columns titled Park Acres Existing, Active Beach
Recreational Acreage, Combined ParkBeach Acreage and Deficit / Excess.
The Park Acres Existing total is 286.4 acres, which excludes 58.1 acres of existing private park area
serving the Newport Coast service area. Note, that the Park Acres Needed total includes 50 acres
needed within Newport Coast. Therefore, the needs column is artificially overstated or the existing
column is artificially understated. In essence, there is no credit given to the existing private parks
within Newport Coast, even though its serves the private residents of that community and has
portions available for public use.
The Active Beach Recreational Acreage total is 90.4 acres and excludes 174 acres of passive beach
open space, 136 acres of open space land in the Upper Bay Ecological Reserve and an undetermined
amount of water open space in the Upper Bay and Newport Harbor. If the open space and
recreational waterways (roughly estimated at over 300 acres in Newport Harbor alone) were
included in the parkland acreage, an additional 610 acres is available for inclusion into the parkland
calculation.
The Combined Park/Beach Acreage total is 376.8 acres and excludes the 58.1 acres available in
Newport Coast. While other service areas reflect a Deficit/ Excess, the column is blank for Newport
Coast. The Deficit / Excess total, for the entire city, reflects a deficit of 38.8 acres. If the 58.1 acres
within Newport Coast were included in the existing acreage calculation, a surplus of parkland
acreage exists within Newport Beach. If any of the passive open space or recreational watercourses
within Newport Harbor is included, the surplus becomes substantially greater. The City's standard
of 5 acres per 1,000 population is exceeded when Newport Coast's existing parkland is included and
is more than doubled if passive open space and active waterways are included.
Table RI is reproduced on the following page:
WALDRON & ASSOCIATES, INC.
I0
Mr. Bryan M. Starr It- April 2, 2007
777 - Parkland Sales - California - Southern California - Oranme Counts
Presumably, the City of Newport Beach is utilizing the Fontes' appraisals as a basis for establishing
the parkland development cost per acre as a part of the formula for the fee in -lieu of the land
dedication. The result, of which, is to assist the City in its acquisition of land devoted to parkland
and open space for recreational purposes. To that end, a more direct basis for establishing in -lieu
fees may be revealed through prices paid by other municipalities for parkland. Note, passive open
space sales were also investigated. Generally, the price per acre is significantly less than the prices
paid for active public parks. The following study excludes passive open space sales.
California - Parkland Acquisitions
A search for land sales purchased by public entities throughout California generated seventy -five
(75) transactions. Sale dates range from 1992 through 2007. The average price per acre was
$26,150. The median price per acre was $128,590. The average size for the property purchased was
84.21 acres.
When the timeframe is narrowed, approximately half of the sales are eliminated. There were thirty-
five (35) transactions from 2000 to 2007. The average price per acre was $63,697. The median price
per acre was $185,106. The average size for the property purchased was 39.64 acres.
During the past four years, nineteen (19) sales in California reflect a median price per acre of
$559,132.
WALDRON & ASSOCIATES, INC.
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Newport Coast inoereles ptVlp and Prorate P.M. iird"ll 14 saw of Nel W Ridge pwrk dedcamtl for pubes me upon cityaoxptence.
-Pmam Park Area is 5 &1 ac. Newport
Coast parka use
and maintenance am uageot to the terms of the PmArme.abon AgBtment.
"CefidUrn. x$Cmga if oo add*"
parks am boa.
83,120 x 5 ac. per thnusana = 415.6 ac
"Includes beach arse wtma a0ft recreation lakes place (i.e., typically within 100 fear of the wavA. In addition, haze are t74acm of passM%beach
open space, 136 saes of open spoon land In he Upper fay Ewlog� omm, and
an undetermined amount ofw open space in the Upper Bay
and Newport Harbor,
=Newport Beach General Plan
777 - Parkland Sales - California - Southern California - Oranme Counts
Presumably, the City of Newport Beach is utilizing the Fontes' appraisals as a basis for establishing
the parkland development cost per acre as a part of the formula for the fee in -lieu of the land
dedication. The result, of which, is to assist the City in its acquisition of land devoted to parkland
and open space for recreational purposes. To that end, a more direct basis for establishing in -lieu
fees may be revealed through prices paid by other municipalities for parkland. Note, passive open
space sales were also investigated. Generally, the price per acre is significantly less than the prices
paid for active public parks. The following study excludes passive open space sales.
California - Parkland Acquisitions
A search for land sales purchased by public entities throughout California generated seventy -five
(75) transactions. Sale dates range from 1992 through 2007. The average price per acre was
$26,150. The median price per acre was $128,590. The average size for the property purchased was
84.21 acres.
When the timeframe is narrowed, approximately half of the sales are eliminated. There were thirty-
five (35) transactions from 2000 to 2007. The average price per acre was $63,697. The median price
per acre was $185,106. The average size for the property purchased was 39.64 acres.
During the past four years, nineteen (19) sales in California reflect a median price per acre of
$559,132.
WALDRON & ASSOCIATES, INC.
Mr. Bryan M. Stan -12- April 2, 2007
Southern California - Parkland Acautsttions
A search for land sales purchased by public entities throughout Southern California (counties of
Ventura, Los Angeles, Orange, Riverside, San Bernardino and San Diego) generated thirty-seven
(37) transactions. Sale dates range from 1992 through 2007. The average price per acre was
$68,849. The median price per acre was $327,735. The average size for the property purchased was
34.51 acres.
When the timeframe is narrowed, over half of the sales are eliminated. There were sixteen (16)
transactions from 2000 to 2006. The average price per acre was $95,153. The median price per acre
was $734,112. The average size for the property purchased was 45.13 acres. .
During the past four years, eleven (11) sales in Southern California reflect a median price per acre
of $909,091.
ran.ee County- Parkland Acauisitions
A search for land sales purchased by public entities throughout Orange County generated seven (7)
transactions. Sale dates range from 1997 through 2007. The average price per acre was $486,892.
The median price per acre was $332,226. The average size for the property purchased was 3.47
acres. A summary of the sales is attached to this letter.
Three (3) of the sales are located in Newport Beach. One (1) transaction occurred in February 1997,
which involved the purchase of 0.34 acres at the rate of $882,353 per acre. Two (2) transactions
occurred around March 2007, involving the purchase of 15.05 acres at the rate of $332,226 per acre
and another containing 2.00 acres at the rate of $87,500 per acre. Without regard to time, the
average price per acre for these three City of Newport Beach acquisitions was $434,026. The
median price per acre was $332,226. The average size for the property purchased was 5.80 acres.
During the past four years, five (5) sales in Orange County reflect a median price per acre of
$254,286.
IV -Sw nrary ofFindinzs & Conclusions
The appraisal analysis for East Bluff Park and Bob Henry Park is flawed with grossly inflated value
conclusions. If the City intends to rely upon the Fontes' appraisals, the result will be a grossly
inflated in -lieu park fee.
By way of the appraiser's assumption, the appraiser has not accounted for the decline in residential
sales and price trends as is evident by a study of Fourth Quarter 2006 residential market trends in
Orange County. Again, by way of the appraiser's assumption, the appraiser has not appropriately
considered entitlement risk. The appraiser has not made the appropriate downward adjustment for
the entitled status in Sale Nos. 1 and 2, two sales treated as unentitled, when in fact, each sold with
entitlements. The appraiser has not made the appropriate downward adjustment for development
density. The average density for all four market data items is 18.65 units per acre, as compared to
the subject properties' assumed 10 units per acre. Cumulatively, these adjustments are substantial
and, if applied appropriately, would result in a rate per acre significantly less than that concluded by
WALDRON CPC ASSOCIATES, INC.
a3
Mr. Bryan M. Starr -13- April 2, 2007
the appraiser. Data No. 4 is a listing of an improved mobilehome park, which generates a stabilized
income stream, and assuming some merit with respect to comparability, has not been considered in
the adjustment process.
The city of Newport Beach has nearly reached build -out with very little remaining land left for
development of any type. The City will need to address meeting housing demand through the
conversion of existing land uses. In terms of parkland needs compared to parklands existing, at
current population levels, there appears to be a surplus of parkland acreage with the City's standard
of 5 acres per 1,000 population. If the 58.1 acres within Newport Coast were included in the
existing acreage calculation, a surplus of parkland acreage exists within Newport Beach. If any of
the passive open space or recreational watercourses within Newport Harbor is included, the surplus
becomes substantially greater. The City's standard of 5 acres per 1,000 population is exceeded when
Newport Coast's existing parkland is included and is more than doubled if passive open space and
active waterways are included.
On a City -wide basis, a question arises as to the validity of an in -lieu park fee in the presence of
surplus parkland and an abundance of other open space and recreational watercourses.
Finally, if the premise of an in -lieu park fee is to assist the City in its acquisition of land suitable for
park utilization, then one direct measure may be the prices paid by other municipalities and public
entities for their park needs. Statewide, during the last four years, the median purchase price of land
intended for park purposes clusters around $560,000 per acre. In Southern California, during the last
four years, the median purchase price of land intended for park purposes clusters around $900,000
per acre. In Orange County, during the last four years, the median purchase price of land intended
for park purposes clusters around $260,000 per acre with two recent purchases by the City of
Newport Beach at rates of $87,500 per acre and $332,226 per acre.
These rates per acre are significantly less than the rate estimated in the Fontes' appraisals, which
range from $3,000,000 to $3,500,000 per acre.
In summary, the appraisals grossly overstate a rate per acre as the basis for an in -lieu park fee. There
appears to be a surplus of existing parkland throughout the city of Newport Beach, calling into
question a need for an in -lieu park fee, let alone an increase in fees. The prices paid by other
municipalities within the past four years, including the City of Newport Beach, appear to be less
than $900,000 per acre, which is less than one -third of the rate concluded in the Fontes' appraisals.
This consultation service is not intended to be an appraisal, per se. It is not to be disseminated to
anyone and is otherwise exclusively for internal disposition purposes, intended to assist you in
discussions with your client. Mr. Bryan M. Starr is the only intended user. Background data is
retained within the work file and forms the basis for these consultation services.
WALDAON & ASSOCIATES, INC.
A
Mr. Bryan M. Starr -14- April 2, 2007
Thank you for the opportunity to be considered for your consulting requirements.
WW: waw
Respectfully submitted,
ALDRON & ASSOCIATES, INC.
Michael F. Waldron, MAT
Principal Consultant
CA #AG011796
WALDRON & ASSOCIATES, INC.
a5
Attachment C
Park Fee Table
,Mp
per 1000 persons
** effective July 16, 2007
aI
Attachment D
Second BIA Comment
Letter
M
May 1, 2007
Homer Bludau
City Manager
City of Newport Beach
3300 Newport Blvd.
Newport Beach, CA 92663
Re: Updated Appraisals / Calculations of Park Dedication In -Lieu Fee Update
Dear Mr. Bludau,
On behalf of the Building Industry Association of Southern California, Orange
County Chapter (BIA/OC), I appreciate the opportunity to provide comments on
the recently updated appraisals that the city commissioned to calculate land values
on both Bob Henry Park and East Bluff Park for the purpose of updating its park
dedication in -lieu fee.
In an attempt to assist the city in this process, the BIA/OC hired an independent
appraiser (Mr. Michael Waldron, MAI) to review and comment on the appraisals
completed by Mr. Steven Fontes, MAI on behalf of the City of Newport Beach.
Mr. Waldron's review highlighted several issues that over stated the initial value of
the two parks in question. The city staff and the city's appraiser concurred with
Mr. Waldron's findings and subsequently revised both the appraised value of the
park land and the per unit in -lieu fee amount. Our membership is grateful that city
staff has incorporated some of our key comments into the initial revisions appraisal
calculation methodology.
Having had the opportunity to review the revised appraisals, Mr. Waldron, on
behalf of the BIA/OC, has prepared comments for the staff to consider. I have
attached Mr. Waldron's complete analysis for your review. Based on Mr.
Waldron's analysis, the membership of the BIA/OC believes the following to be
true.
• The adjusted sale price per acre for the April 2007 — East Bluff Park
appraisal ranges from $1,326,022 to $2,221,244. The average is $1,759,922
per acre with a median at $1,773,633 per acre. An opinion of value
clustering around $1,770,000 is considered more appropriate.
o Based on these figures the in -lieu would be calculated at $18,497
per unit.
• The adjusted sale price per acre for the April 2007 — Bob Henry Park
appraisal ranges from $1,894,317 to $2,517,410. The average is $2,221,326
per acre with a median at $2,205,864 per acre. An opinion of value
clustering around $2,220,000 is considered more appropriate.
Orange County
Chapter
BuildigR, lurlualry As o6ation
of SOLItholn California
17744 Sky Park Circle
Suite 170
Irvine, California 92614
949.553.9500
fax 949.553.9507
www.biaoc.com
PRESIDENT
TIM MCSUNAS
THE SHOPOFF GROUP
VICE PRESIDENT
DAVID GREMINGER
FIELDSTONE COMMUNITIES
SECOND VICE PRESIDENT
PAUL JOHNSON
RANCHO MISSION VIEJO
TREASURER
DEBRA PEMBER
JOHN LAING HOMES
SECRETARY
DAVE BARTLETT
BROOKFIELD HOMES
IMMEDIATE PAST PRESIDENT
TOM GRABLE
WILLIAM LYON HOMES
TRADE CONTRACTOR COUNCIL V.P.
JIM YATES
GOLDEN WEST PLUMBING
ASSOCIATE VICE PRESIDENT
LAER PEARCE
LAER PEARCE & ASSOCIATES
MEMBER -AT -LARGE
BILL WATT
BAYWOOD DEVELOPMENT
MEMBER -AT -LARGE
ANDY BERNSTEIN
JACKSON, DEMARCO,
TIDUS & PECKENPAUGH
KRISTINE THALMAN
CHIEF EXECUTIVE OFFICER
An .Affiliate of Lhe National
Association of Home Builder
and IITB California Building
lndustn Aesociafion
W
o Based on these figures the in -lieu would be calculated at $23,200
per unit
• The average of the two appraisals would be $1,995,000.
o Based on the average figure the in -lieu fee would be calculated
at $20,848.50
We respectfully request that your office take our comments and the comments of
Mr. Waldron into consideration as you move closer to setting a fair and equitable
park dedication in -lieu fee adjustment. The membership of the BIA/OC
appreciates being a part of this process and offers our collective resources in the
event that we might be of further assistance.
Thank you for your thoughtful consideration.
All the best,
4/� Amz
Kristine E. Thalman
Chief Executive Officer
0
WALDRON & ASSOCIATES, INC
REAL ESTATE APPRAISERS AND CONSULTANTS
205 SOUTH ORANGE STREET
SUITE 100
ORANGE, CALIFORNIA 92666
TELEPHONE (714) ]]I -1100
FACSIMILE (714) ]]1 -1120
May 1, 2007
Mr. Bryan M. Starr
Director — External Affairs
Building Industry Association of Orange County
17744 Sky Park Circle
Irvine, California 92614
MICHAEL F. WALDRON. MAI
JANICE K. WALDRON
CHRISTER FIEGE- KOLLMANN
PETROS BERHANE
JAMES M. BIGELOW
KEVIN R. WALDRON
RE: Second Consultation, Fontes Amended Appraisals, Park Dedication — In Lieu Fees,
Newport Beach, California.
Dear Mr. Starr:
The Building Industry Association (BIA) has requested additional consulting services with a focus
on a preliminary study and comment regarding the appraisal bases for regulatory, in -lieu park fees
as proposed by the City of Newport Beach (City). An Executive Summary of the findings follows.
This is a focused review and comment of two amended appraisals prepared by Mr. Steven Fontes,
MAI at the request of Mr. Dan Trimble, Program Manager, Planning Department for the City of
Newport Beach. This second review follows a prior four -part study prepared and delivered on April
2, 2007. The four -part study included a review and critique of two original appraisals d ated
November 30, 2006 and prepared by Mr. Fontes.
Executive Summary
❖ The City's Staff and BIA representatives met on April 30, 2007. At this meeting, Staff
provided a summary of changes, additions and deletions to the original appraisal reports,
dated November 30, 2006, presumably a response by the appraiser to our findings and
conclusions expressed in our April 2, 2007 study. Staff also provided complete originals of
two new appraisal reports covering East Bluff Park and Bob Henry Park. Unfortunately, the
appraiser failed to appropriately date the new reports based upon the revised preparation
date, which would likely have been sometime within the period April 2, 2007 to April 30,
2007.
Jk
Mr. Bryan M. S t a r r - 2 - May 1, 2007
❖ For discussion purposes, the new appraisals delivered at the April 30, 2007 meeting will be
referred to as the April 2007 — East Bluff Park appraisal and the April 2007 - Bob Henry
Park appraisal.
❖ The original November 2006 appraisals provided to this office did not include addenda,
which was included in the April 2007 appraisals. A contract with an attached scope of
services refers to four properties commissioned by the City for the purpose of providing a
baseline value, which would be used to establish regulatory, in -lieu park fees. The four
properties include East Bluff and Bob Henry parks and two commercial properties located at
3040 -3050 W. Coast Highway (a Baja Fresh fast food restaurant; APN's 459- 186 -16 and -
17) and the southeast comer of Newport Avenue and McFadden Place on the Balboa
Peninsula (an office building; APN 047 - 171 -14). Appraisals of the commercial properties
were not provided or discussed.
❖ The BIA should note that the City requested appraisals to address fair market value as
compared to market value. These definitions of value are distinguishable by definition. Fair
market value is a legal requirement as a measure of property taken by eminent domain in a
forced sale, whereas market value is an industry definition used as a standard value measure
for an open market sale. While several important distinctions exist, the primary difference is
identified by the highest price for fair market value and the most probable price for market
value. The appraisal includes the statutory definition of fair market value. The City has
apparently taken a policy position that it would only acquire land by way of its eminent
domain authority. The effect of fair market value is to seek the upper limit of substantiated
value, thereby increasing the park fee.
❖ Mr. Fontes included four (4) identical market data items in each of the original appraisal
reports, identified as Nos. 1 through 4. He has deleted Sale No. 2, a sale in Stanton, and Item
No. 4, a listing in Costa Mesa. He has added a new sale identified as No. 2, a sale in
Newport Beach, either subsequently discovered or previously discovered and determined to
be not comparable.
❖ There are now three (3) sales, which the appraiser utilizes in the Sales Comparison
Approach, two of the original sales and one new sale. Note, Sale No. 1 in the original
reports is also Sale No. 1 in the new April 2007 — East Bluff Park appraisal and the April
2007 - Bob Henry Park appraisal. Sale No. 3 in the original reports is also Sale No. 3 in the
new April 2007 — East Bluff Park appraisal and the April 2007 - Bob Henry Park appraisal.
❖ The appraiser has revised the Adjustment Grid, adding to the elements of comparison
"Density" and "Entitlements ".
❖ The adjustments for density and entitlements appear to be appropriate and reasonable in
magnitude.
❖ Sale No. 2 was reported to have sold above market for an assemblage premium, quantified
by the Buyer at $400,000. The appraiser applied a downward adjustment for this
characteristic.
WALDRON & ASSOCIATES, INC. 3 P
Mr. Bryan M. Starr - 3 - May 1, 2007
The adjusted sale price per acre for the April 2007 — East Bluff Park appraisal ranges from
$1,894,317 to $2,425,501. The average is $2,180,354 per acre with a median at $2,159,909
per acre. He concludes to a rate of $2,250,000 per acre, which is above the average and the
median rates.
4- The adjusted sale price per acre for the April 2007 - Bob Henry Park appraisal ranges from
$2,273,180 to $2,772,001. The average is $2,520,864 per acre with a median at $2,522,591
per acre. He concludes to a rate of $2,750,000 per acre, which is above the average and the
median rates.
4- In the original appraisal reports, the appraiser applied location adjustments to each market
data item. Because the market data was identical for each appraisal, one could deduce the
appraiser's assessment of locational difference between the East Bluff Park and the Bob
Henry Park. In essence, it was the appraiser's opinion that Bob Henry Park was in a slightly
superior location, at a premium over East Bluff Park by a magnitude of five percent (5 %).
In the April 2007 appraisals, the appraiser applies the same location adjustment to the
market data in each appraisal. The appraiser either has made an error or is now inconsistent
with his original opinion as it relates to the locational difference between the two parks.
e• The most troubling inconsistencies are the appraiser's treatment of the adjustments to Sale
Nos. I and 3, which have changed from the original analyses. I believe this to be an error.
Eas[BluffPark
❖ For the April 2007 — East Bluff Park appraisal, Sale No. I has been adjusted differently for
"Site Size" ( -10% as compared to a prior -20 %) and "Parcel Shape" ( -5% as compared to a
prior -10 %). Sale No. 3 has been adjusted differently for "Location" (+25% as compared to
a prior +15 %), "Site Size" ( -5% as compared to a prior -10 %) and "Parcel Shape" ( -5% as
compared to a prior A 0 %). There is no reason for these adjustments to have changed from
the prior analyses and no discussion to substantiate any change. The changes to these
adjustments results in overstating the adjusted sale price indicators and the opinion of fair
market value.
If the grid adjustments are applied consistently with the original November 2006 appraisal,
in the April 2007 — East Bluff Park appraisal, the Remaining Adjustment Subtotal column
for Sale No. 1 should reflect -65% as opposed to -50 %. The Adjusted Sale Price per Acre
should be $1,326,022, not $1,894,317.
❖ If the grid adjustments are applied consistently with the original November 2006 appraisal,
in the April 2007 — East Bluff Park appraisal, the Remaining Adjustment Subtotal column
for Sale No. 3 should reflect -50% as opposed to -30 %. The Adjusted Sale Price per Acre
should be $1,732,501, not $2,425,501.
WALDRON & ASSOCIATES, tNC. P
Mr. Bryan M. Starr - 4 - May 1, 2007
❖ Once corrected, the adjusted sale price per acre for the April 2007 — East Bluff Park
appraisal ranges from $1,326,022 to $2,221,244. The average is $1,759,922 per acre
with a median at $1,773,633 per acre. An opinion of value near the average and
median is more appropriate.
Bob Henry Park
❖ For the April 2007 — Bob Henry Park appraisal, Sale No. 1 has been adjusted differently for
"Location" ( +10% as compared to a prior +5 %) and "Site Size" ( -5% as compared to a prior
-10 %). Sale No. 3 has been adjusted differently for "Location" ( +25% as compared to a
prior +10 %). There is no reason for these adjustments to have changed from the prior
analyses and no discussion to substantiate any change. The changes to these adjustments
results in overstating the adjusted sale price indicators and the opinion of fair market value.
❖ If the grid adjustments are applied consistently with the original November 2006 appraisal,
in the April 2007 — Bob Henry Park appraisal, the Remaining Adjustment Subtotal column
for Sale No. 1 should reflect -50% as opposed to -40 %. The Adjusted Sale Price per Acre
should be $1,894,317, not $2,273,180.
4- If the grid adjustments are applied consistently with the original November 2006 appraisal,
in the April 2007 — Bob Henry Park appraisal, the Remaining Adjustment Subtotal column
for Sale No. 3 should reflect -35% as opposed to -20 %. The Adjusted Sale Price per Acre
should be $2,252,251, not $2,772,001.
❖ Once corrected, the adjusted sale price per acre for the April 2007 — Bob Henry Park
appraisal ranges from $1,894,317 to $2,517,410. The average is $2,221,326 per acre
with a median at $2,205,864 per acre. An opinion of value near the average and
median is more appropriate.
Summary of Conclusions
The appraisal analysis for East Bluff Park and Bob Henry Park is inconsistent with prior analyses
and conclusions, generating inflated value conclusions. If the City intends to rely upon the Fontes'
revised appraisals without correction, the result will be an inflated in -lieu park fee.
Once corrected, the adjusted sale price per acre for the April 2007 — East Bluff Park appraisal ranges
from $1,326,022 to $2,221,244. The average is $1,759,922 per acre with a median at $1,773,633 per
acre. An opinion of value clustering around $1,770,000 is considered more appropriate. At this rate
and based upon the City's worksheet provided at the April 30, 2007, the resultant in -lieu park fee
would be $18,497 per unit.
Once corrected, the adjusted sale price per acre for the April 2007 — Bob Henry Park appraisal
ranges from $1,894,317 to $2,517,410. The average is $2,221,326 per acre with a median at
$2,205,864 per acre. An opinion of value clustering around $2,220,000 is considered more
appropriate. At this rate and based upon the City's worksheet provided at the April 30, 2007, the
resultant in -lieu park fee would be $23,200 per unit.
WALDRON & ASSOCIATES, INC. ! �
Mr. Bryan M. Starr -5 - May 1, 2007
This consultation service is not intended to be an appraisal, per se. It is not to be disseminated to
anyone and is otherwise exclusively for internal disposition purposes, intended to assist you in
discussions with your client. Mr. Bryan M. Starr and the Building Industry Association of Orange
County (BIAOC) are the only intended users. Background data is retained within the work file and
forms the basis for these consultation services.
Thank you for the opportunity to be considered for your consulting requirements.
MFW: waw
Respectfully submitted,
ALDRON & ASSOCIATES, INC.
Michael F. Waldron, MAI
Principal Consultant
CA #AGOI 1796
WALDRON & ASSOCIATES, INC. :
CONTINGENT AND LIMITING CONDITIONS
UPON WHICH CONSULTING IS MADE
This report is made expressly subject to the contingent and limiting conditions, factors and
assumptions herewith:
This is a Consulting Report and is intended to comply with the reporting
requirements set forth under Standard Rule 5 of the Uniform Standards of
Professional Appraisal Practice for a Consulting Report. As such, it does not include
full discussions of the data, reasoning, and analyses that were used in the appraisal
process to develop the consultant's opinions. Supporting documentation concerning
the data, reasoning, and analyses is retained in the consultant's file. The information
contained in this report is specific to the needs of the client and for the intended use
stated in this report. The consultant is not responsible for unauthorized use of this
report.
No responsibility is assumed for legal or title considerations. Title to the property is
assumed good and marketable unless otherwise stated in this report.
The property is analyzed as if free and clear of any or all liens and encumbrances
unless otherwise stated in this report.
Responsible ownership and competent property management are assumed unless
otherwise stated in this report.
That no guarantee is made as to the correctness of estimates or opinions furnished by
others, which have been used in preparing this consulting report and that, no
liabilities are assumed because of inaccuracies in such estimates or opinions.
That this consulting is subject to review upon presentation of data that might be later
made available, undisclosed or not available at this writing.
That the consultant herein, by reason of this consulting, is not required to give
testimony or attendance in court or any governmental hearing with reference to the
property in question, unless arrangements have previously been made therefore.
All engineering is assumed correct. Any plot plans and illustrative material in this
report are included only to assist the reader in visualizing the property.
9. Unless otherwise stated in this consulting report, it is assumed that there are no
hidden or unapparent conditions of the property, subsoil or structures that render it
more or less valuable. No responsibility is assumed for such conditions or for
arranging for engineering studies that may be required to discover them.
WALDRON & ASSOCIATES, INC.
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Contingent and Limiting Conditions
Page 2
10. It is assumed that there is full compliance with all applicable federal, state and local
environmental regulations and laws unless otherwise stated in this consulting report.
It is assumed that all applicable zoning and use regulations and restrictions have been
complied with, unless nonconformity has been stated, defined and considered in this
consulting report.
12. It is assumed that all required licenses, certificates of occupancy or other legislative
or administrative authority from any local, state or national governmental or private
entity or organization have been or can be obtained or renewed for any use on which
the value estimates contained in this report are based.
13. Any sketch in this report may show approximate dimensions and is included to assist
the reader in visualizing the property. Maps and exhibits found in this report are
provided for reader reference purposes only. No guarantee as to accuracy is
expressed or implied unless otherwise stated in this report. No survey has been made
for the purpose of this report.
14. It is assumed that the utilization of the land and improvements is within the
boundaries or property lines of the property described and that there is no
encroachment or trespass unless otherwise stated in this report.
15. The consultant is not qualified to detect hazardous waste and/or toxic materials. Any
comment by the consultant that might suggest the possibility of the presence of such
substances should not be taken as confirmation of the presence of hazardous waste
and/or toxic materials. Such determination would require investigation by a qualified
expert in the field of environmental assessment. The presence of substances such as
asbestos, urea- formaldehyde foam insulation or other potentially hazardous materials
may affect the value of the property. The consultant's opinions are predicated on the
assumption that there is no such material on or in the property that would cause a loss
in value unless otherwise stated in this report. No responsibility is assumed for any
environmental conditions or for any expertise or engineering knowledge required to
discover them. The consultant's descriptions and resulting comments are the result of
the routine observations made during the consulting process. No responsibility is
assumed by the consultant neither for the existence of any hazardous or toxic wastes
nor for the determination of the costs of removal and/or disposal thereof.
16. Unless otherwise stated in this report, the subject property is analyzed without a
specific compliance survey having been conducted to determine if the property is or
is not in conformance with the requirements of the Americans with Disabilities Act.
The presence of architectural and communications barriers that are structural in
nature that would restrict access by disabled individuals may adversely affect the
property's value, marketability or utility.
17. Any proposed improvements are assumed to be completed in a good competent
manner in accordance with the submitted plans and specifications.
WALDRON & ASSOCIATES, INC.
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Contingent and Limiting Conditions
Page 3
18. The distribution, if any, of the total valuation in this report between land and
improvements applies only under the stated program of utilization. The separate
allocations for land and buildings must not be used in conjunction with any other
appraisal and are invalid if so used.
19. Possession of this report, or a copy thereof, does not carry with it the right of
publication. It may not be used for any purpose by any person other than the party
to whom it is addressed without the written consent of the consultant and, in any
event, only with proper written qualification and only in its entirety.
20. Neither all nor any part of the contents of this report (especially any conclusions as
to value, the identity of the consultant or the firm with which the consultant is
connected) shall be disseminated to the public through advertising, public relations,
news sales or other media without prior written consent and approval of the
consultant.
21. The consultant reserves the right to amend the opinions expressed herein should any
changes, Court rulings and/or additional information becomes available.
WALDRON c& ASSOCIATES, INC.
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