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HomeMy WebLinkAbout15 - In-Lieu Park Dedication• • 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 IMNEC[ArE PAST PRESDFNT YOU GRAM.E %MLDAM LYON ] ixWES TRADF. C!) .NMOORS ALLIANCE. N' JIM YAI ES GOLDEN WEST PLUMONC ASSOCIATE VICE PRESIDE:Nr i AER PEARCE LAER PENtCE A ASS ;> I:TES MEMBE247 LARGE 8111. WATT BAYWOODDEVELOPMENi MEMBER AT -LARGE ANDY BERNSTEIN JACKSON, DCMARCO. T:D11.5 8 PECAENPA.UGI1 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 $559,132. WALDRON & ASSOCIATES, INC. adds - Pont A, MI . ;tParkAe(ea - - ACdyha'Ee&,clr GGmbMMPbIYV baba•R: •J' . S"9,,'Arev ' .; . Nkretl"ed , �,... - - RffCrotl:D6'IkE tt a .. . aannockAtY9ar 1. West Newport 64.7 9.1 t 34 43.1 •21,6 2 Balboa Peninsula 25 5 6.5 44 50 5 +25 0 3 Newport He In Upper Say 4 Santa Am Heights 64.3 32_ I t 502 �` 6.8 0 50.2 i 0 6.8 14 1 +36 5 Lower Bay � 173 _... �VO1 0.1 .� 172 6. Balboa Island 17.9 0.3 1 1.3 -16.6 7. EasrbiuH 710_ _ 0 710 i +397._.__ 8. Sig Canyon 13 9 I O ! D 0 _. 139 9. Newport Center ., 10.9 19 _1...__.... 0 19 +8,1 _ 10. Corona del Mar 44.4 � 23 9 11.4 1 35.3 41 11 Haroor View 72.2 99.5 - 0 98.5 +27.3 12. Newport Coast' 50 -, _ 58,1' _ _ 0 .50 7ayah 415.6 a 28 &4 90.4 b 376.8 1 - 38.8" _ Newport Coast inoereles ptVlp and Prorate P.M. iird"ll 14 saw of Nel W Ridge pwrk dedcamtl for pubes me upon cityaoxptence. -Pmam Park Area is 5 &1 ac. Newport Coast parka use and maintenance am uageot to the terms of the PmArme.abon AgBtment. "CefidUrn. x$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. 3 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. 3 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. 3�6