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HomeMy WebLinkAboutAgenda Packet 2-12-20 Work SessionFebruary 12, 2020, Work Session EUGENE CITY COUNCIL AGENDA February 12, 2020 12:00 p.m. CITY COUNCIL WORK SESSION Harris Hall, 125 East 8th Avenue Eugene, Oregon 97401 Meeting of February 12, 2020; Her Honor Mayor Lucy Vinis Presiding Councilors Emily Semple, President Jennifer Yeh, Vice President Mike Clark Greg Evans Chris Pryor Claire Syrett Betty Taylor Alan Zelenka 12:00 p.m. CITY COUNCIL WORK SESSION 1. WORK SESSION: Incentives for Accessory Dwelling Units February 12, 2020, Work Session For the hearing impaired, an interpreter can be provided with 48 hours' notice prior to the meeting. Spanish-language interpretation will also be provided with 48 hours' notice. To arrange for these services, contact the receptionist at 541-682-5010. City Council meetings are telecast live on Metro Television, Comcast channel 21, and rebroadcast later in the week. El consejo de la Ciudad de Eugene agradece su interés en estos asuntos de la agenda. El lugar de la reunión tiene acceso para sillas de ruedas. Se puede proveer a un intérprete para las personas con discapacidad auditiva si avisa con 48 horas de anticipación. También se puede proveer interpretación para español si avisa con 48 horas de anticipación. Para reservar estos servicios llame al 541-682-5010. Las reuniones del consejo de la ciudad se transmiten en vivo por Metro Television, Canal 21 de Comcast y son retransmitidas durante la semana. For more information, contact the Council Coordinator at 541-682-5010 or visit us online at www.eugene-or.gov. February 12, 2020, Work Session – Item 1 EUGENE CITY COUNCIL AGENDA ITEM SUMMARY Work Session: Incentives for Accessory Dwelling Units Meeting Date: February 12, 2020 Agenda Item Number: 1 Department: Planning and Development Staff Contact: Anne Fifield www.eugene-or.gov Contact Telephone Number: 541-682-5451 ISSUE STATEMENT This work session will provide City Council information on incentives that could lower the cost of developing or owning an accessory dwelling units. BACKGROUND Housing affordability and availability is a long-standing and growing problem in Eugene. In 2018, City Council directed staff to implement what became the Housing Tools and Strategies project, to identify potential tools and strategies available to the City to address housing affordability, availability and diversity for all income levels. That project included technical research and stakeholder input to identify a variety of actions the City could pursue to reduce costs and/or barriers to building more housing. In the Housing Tools and Strategies project, the City contracted with Strategic Economics to evaluate barriers to housing affordability, availability and diversity. Strategic Economics submitted a final report in January 2019, which stated that an effective ADU policy can contribute to achieving or maintaining affordability while accommodating growth. ADUs are a relatively low-cost housing type since there are no land costs and because they capitalize on existing infrastructure. In the September 16, 2019 Work Session regarding Accessory Dwelling Units, City Councilors asked staff to explore the creation of incentives that could reduce the cost of constructing ADUs. Council passed a motion that asked the City Manager to deliver a memorandum that addresses a 10-year property tax exemption, an SDC discount or credit, or other financial incentives identified by staff that could lower the cost of building ADUs. To identify and understand potential financial tools, staff reviewed analysis conducted during the Housing Tools and Strategies project and conducted additional research. We identified six different potential tools that could lower the cost of developing or owning an ADU in Eugene. The six potential tools include: A. Property tax exemption; B. Waive System Development Charges; February 12, 2020, Work Session – Item 1 C. Scale SDCs; D. Waive building permit fees; E. Waive land use application fees; and F. Develop pre-approved building plans for ADUs. Attachment A summarizes the different tools. It provides a description, a brief summary of key legal issues and administrative requirements, the estimated cost reduction to the property owner, and the fiscal impact to the City of Eugene. Triple Bottom Line Incentivizing ADUs addresses the City Triple Bottom vision.  Social equity – ADUs can contribute to achieving or maintaining housing affordability, since there are no land costs and because they capitalize on existing infrastructure. They can provide renters an affordable-by-design housing option and an opportunity for seniors to age in place.  Environmental stewardship – Increasing housing units on existing infrastructure reduces the community’s need to expand outward, protecting farm and forest land and reducing Eugene’s per-capita carbon footprint.  Economic prosperity – ADUs can provide property owners with supplemental income. By capitalizing on existing infrastructure, ADUs increase Eugene’s property tax base yet do not create new liabilities associated with expanding infrastructure systems. The incentives that waive City fees and charges would create unfunded liabilities. PREVIOUS COUNCIL DIRECTION March 13, 2019, Work Session Staff updated council on the Housing Tools and Strategies work and planned next steps. January 21, 2020, Work Session Council approved changes to the Land Use code regarding ADUs. COUNCIL OPTIONS This work session is for informational purposes only. ATTACHMENTS A. Potential Financial Incentives for Accessory Dwelling Units FOR MORE INFORMATION Staff Contact: Anne Fifield Telephone: 541-682-5451 Staff E-Mail: afifield@eugene-or.gov Attachment A Potential Financial Incentives for ADUs February 2020 City of Eugene 1 February 12, 2020, Work Session – Item 1 Potential Financial Incentives for Accessory Dwelling Units Description Legal Issues Administrative Requirements Estimated Cost Reduction to Property Owner Fiscal Impact to City of Eugene A. Property Tax Exemption Property taxes reflect the value of a property, and an improvement as significant as an ADU will affect a property’s assessed value (AV) and increase property taxes. Exempting the increase in taxes associated with constructing an ADU would lower costs for property owners for the exemption period. An exemption program exists in Eugene for multi-unit properties (MUPTE); its purpose is to encourage the development of multi-unit housing in the downtown. Oregon state law allows cities to create a program that allows a property tax exemption for new multi-unit housing, where the exemption can be for as long as 10 years. Its purpose is to promote private investment in transit-supportive multiple-unit housing in transit-oriented areas. The state law allows the local government to determine the minimum number of dwelling units that are eligible for the exemption. It is not clear that lowering the minimum number of units to 2 would meet the legislature’s intent for this tax exemption. Application of the MUPTE to ADUs city-wide would certainly require city code amendments and may require statutory amendments as well. Affected taxing districts (whose combined rate of taxation equals at least 51% of the total rate of taxation levied on the property) would need to concur with the tax exemption program. Eugene’s MUPTE program requires a proposed development to meet a number of public benefit criteria to be eligible for an exemption: Documentation showing energy efficiency; Financial feasibility analysis to show project need; A plan to show efforts to use local contractors; Project design; A $2,400 application fee. The application is reviewed by a panel of citizens who make a recommendation to City Council. City Council approves an application before an exemption is granted. Current program requires extensive staff time. Two applications in calendar year 2019 used over 500 hours of staff time. The application process takes about 3 months to complete. About $2,000 per year, over exemption period. Based on an assumed construction value of $150,000. Actual assessed values of new ADUs vary widely. ADUs permitted since 2015 have seen property tax increases from $320 to 2,200. The City and other taxing districts would not generate property tax revenue during the exemption period. The avoided revenue to the City’s General Fund would be about 40% of the total exemption. Attachment A Potential Financial Incentives for ADUs February 2020 City of Eugene 2 February 12, 2020, Work Session – Item 1 Description Legal Issues Administrative Requirements Estimated Cost Reduction to Property Owner Fiscal Impact to City of Eugene B. Waive SDCs System Development Charges are collected from development and redevelopment projects. SDCs are designed to recover a fair share of the costs to increase capacity of infrastructure to accommodate new growth. The City collects SDCs for wastewater (local and regional), stormwater, transportation and parks. In 2018, the City collected about $7,500 in SDCs per ADU. In 2019, SDCs for ADUs declined in 2 ways: MWMC reduced its SDC for ADUs by about $200; The City waived Transportation SDCs for ADUs, up to a $40,000 annual cap. In 2019, SDCs for ADUs were about $6,200. In addition to the City’s SDCs, new development pays SDCs for water (collected by EWEB). The City of Eugene has an on- going program to waive SDCs for ADUs that meet criteria to be considered affordable housing. The exemptions can be used for rental housing targeted to households earning 60% of the area median income and 80% for owner-occupied units. The City waives SDCs for affordable units up to $240,000 annual cap. The City Council would have to pass an ordinance authorizing a program to waive SDCs for ADUs that do not meet affordability criteria. Staff estimate that the administrative burden of implementing a waiver is low and could be incorporated into the existing fee collection in the permitting process. To receive the SDC waiver for qualifying affordable ADUs, the applicant submits a form prior to construction that documents request. Renter must meet income qualifications at initial move in. About $6,000. This figure includes estimated SDCs for City wastewater Parks Stormwater Transportation Administrative fee It does not include the cost of the MWMC wastewater SDC. Waiving SDCs for ADUs would require a subsidy from some other source (such as the General Fund) or would create unfunded liabilities for future infrastructure projects. The impact to the SDC funds would depend on the number of ADUs constructed. If the City’s SDCs for local wastewater, stormwater, transportation, and parks were waived, the total avoided revenue to the combined SDC funds per ADU would be about $6,000. In 2019, the City waived 12 Transportation SDCs (reported by Public Works Engineering). If the City had waived all SDCs for those 12 units, it would have foregone about $72,000. Attachment A Potential Financial Incentives for ADUs February 2020 City of Eugene 3 February 12, 2020, Work Session – Item 1 Description Legal Issues Administrative Requirements Estimated Cost Reduction to Property Owner Fiscal Impact to City of Eugene C. Scale SDCs ADUs typically have lower occupancy than single-family detached homes and they capitalize on existing infrastructure. The SDC structure could be modified to account for the smaller impact that small, infill development has on infrastructure systems. The City of Eugene and MWMC have already lowered SDCs for Transportation and Regional Wastewater. The City is considering a reduced Parks SDC for ADUs. EWEB changed its SDC policy in 2019, reducing the SDC for ADUs by about half. City Council would have to pass an ordinance to change the SDC structure Staff estimate that the administrative burden of implementing a waiver is low and could be incorporated into the existing fee collection in the permitting process. Unknown. The avoided revenue would depend on how individual SDCs were scaled. D. Waive building permit fees Building permit fees are up-front costs associated with almost any type of construction and are controlled by the City. The fees cover staff time required to review proposed projects and improvements. Waiving fees can be done through an Administrative Order signed by the City Manager. Staff estimate that the administrative burden of implementing a waiver is low and could be incorporated into the permitting process. About $3,500. Building fees depend on the complexity of the project, and they vary across projects. This figure is a rough estimate based on ADUs permitted in 2018 and 2019. Building Permit Services is 100% fee supported, meaning that the fee covers the staff time to do reviews and inspections. Waiving permit fees for ADUs would require a subsidy from some other source, such as increasing building permit fees for other building types, or rely on reserves. If the City waived permit fees for 12 units (the number of Transportation SDCs waived in 2019), it would forego about $42,000 in revenue. Attachment A Potential Financial Incentives for ADUs February 2020 City of Eugene 4 February 12, 2020, Work Session – Item 1 Description Legal Issues Administrative Requirements Estimated Cost Reduction to Property Owner Fiscal Impact to City of Eugene E. Waive land use application fees Land use application fees are up- front costs required in some instances in order to prepare land for future development. ADU development rarely requires land use adjustment. Typically, only a building permit is needed for the construction of an ADU. However, on a rare occasion, a land use application is desired or needed. The most common, an adjustment review, is utilized when an applicant chooses to adjust certain land use standards for their project. Waiving fees can be done through an Administrative Order signed by the City Manager. Staff estimate that the administrative burden of implementing a waiver is low and could be incorporated into the permitting process. About $600, on those projects that require a land use application. The most common, an adjustment review, is utilized when an applicant chooses to adjust certain land use standards for their project. Each adjustment review application adds approximately $600 in city fees to a project. Waiving land use fees for ADUs would require a subsidy from some other source, such as increasing land use fees for other building types, or rely on reserves. Of the 12 ADUS that had the Transportation SDC waived in 2019, none had an associated land use application. F. Develop pre-approved building plans for ADUs The City could offer a library of pre-approved building plans, which lowers costs for ADU developers: They could avoid the cost of an architect; and Permit fees would decline, as the review time would be diminished. Other communities have successfully implemented pre- approved building plans for ADUs which have resulted in an increase in ADUs constructed- Seattle, Washington; San Jose and Encinitas, California; and San Diego County, California. These plans have lowered the cost and complexity barrier for adding new housing types to each community. Providing pre-approved plans that offer a range of sizes and design None. Staff would work with architects to develop a library of plans and approve them. Permit review would still occur, based on circumstances that change from site to site, such as public works pieces like utility connections and erosion control and fire/life safety measures. The process of creating the plan sets will need to be thorough to address the community’s needs. Each site has a different topography. Having plans for a variety of topographies, designs, sizes, and accessibility needs will result in a lot of upfront community engagement, design work, and plan review Roughly $6,000. Pre-approved plans would not eliminate design costs. A project will still require material selection and design specifics, as well as site-specific design issues. City staff would have to devote time to manage a contract with a consultant to create the library of plans. Staff estimate that the contract would cost roughly $50,000. Attachment A Potential Financial Incentives for ADUs February 2020 City of Eugene 5 February 12, 2020, Work Session – Item 1 Description Legal Issues Administrative Requirements Estimated Cost Reduction to Property Owner Fiscal Impact to City of Eugene options allow homeowners to customize the ADU to the look and feel of their existing home. to arrive at a library of plans suitable for Eugene.