Report Prepared by: Leah Brown, Management Analyst, Development Services
Title
SUBJECT: Approval of a Professional Services Agreement for $95,000 to Conduct a Prohousing Feasibility Study
REPORT IN BRIEF
Recommend approving an Agreement for Professional Services with RSG, Inc., for $95,000 to evaluate our current policy, conduct a Prohousing Feasibility Study, recommend an in-lieu fee structure for affordability, Housing Trust Fund guidance and assisting with applying for State of California Housing and Community Development’s (HCD) Prohousing Designation Program.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving an Agreement for Professional Services with RSG, Inc. (RSG), in the amount of $95,000.00 to conduct a Prohousing Feasibility Study, recommend an in-lieu fee structure for affordability, policy guidance for establishing a Housing Trust Fund, and assisting with applying for HCD’s Prohousing Designation Program; and,
B. Authorizing the City Manager or Deputy City Manager to execute the agreement, and any necessary documents to apply for HCD’s Prohousing Designation Program.
Body
ALTERNATIVES
1. Approve the agreement, as recommended by staff; or
2. Deny; or
3. Refer to staff for reconsideration of specific items.
AUTHORITY
Charter of the City of Merced, Section 200, et seq.
CITY COUNCIL PRIORITIES
As provided for in the 2022-2023 Adopted Budget and the City Council’s Prohousing Policies.
DISCUSSION
On April 4, 2022, the Merced City Council adopted Council Resolution No. 2022-15 (Attachment 1), which adopted a bridge or interim affordable housing production requirement similar to Inclusionary Zoning to new private market rate development, with some specific exclusions and exemptions, at a rate of twelve and a half percent (12.5%). The Council additionally supported the preparation of a study to determine if this rate is appropriate or if other rates should be considered given the local housing market conditions. This study would also address creating an in-lieu fee as an option to meet the program requirements which would be deposited into a Housing Trust Fund. The City Council is aware of AB 1505 and that an affordability level set on private market development above fifteen percent (15%) requires an Inclusionary Zoning Ordinance and a Feasibility Study. The attached agreement is intended to meet these needs.
In April 2022, the City issued a request for proposals (Attachment 2) to conduct a Prohousing Feasibility Study and to recommend an in-lieu fee structure for developers as on option towards meeting the required affordable development percentage. The money collected from in-lieu fees would go toward the newly formed Housing Trust Fund, already started with a $500,000 City Council budget allocation. Associated tasks include, recommending guidelines on best practices for spending, and administering the Housing Trust Fund, and formation of a Prohousing Policy that will help the City attain HCD Prohousing Designation. HCD Prohousing Designation would give the City additional points and other preference in scoring of competitive housing grants and other programs, enhancing the ability to fund local affordable housing development.
RSG, Inc. submitted a comprehensive proposal that met our needs within our proposed budget. No other consultants submitted proposals. Staff reviewed the scope of work and budget, as well as, requested review by the City Attorney. The City Attorney was asked about the need for a Nexus Study vs an economic Feasibility Study. The City Attorney and RSG, agreed that a Nexus Study is only needed if a community is trying to establish a commercial linkage fee. Recent court decisions along with the passage of AB 1505, clarified that local inclusionary housing ordinances can be justified for sale and rental development as long as they bear a reasonable relationship to the public welfare, meaning that a Nexus Study is no longer required for a residential in-lieu fee. The Feasibility Study proposed by RSG meets the requirements needed to develop an Inclusionary Ordinance above fifteen percent (15%), should that be the desire of City Council. RSG currently works as a consultant for the Housing Division of the City and they have a good relationship with City staff. Staff recommends approval of the Agreement for Professional Services with RSG (Attachment 3).
IMPACT ON CITY RESOURCES
The funding for this agreement is provided via the Local Early Action Planning Grant (LEAP-Fund 091) from the State of California Department of Housing and Community Development (HCD). No appropriation of funds is needed.
ATTACHMENTS
1. Resolution 2022-15, including the Regional Housing Needs Allocation Unit Production Plan of April 4, 2022
2. Request for Proposals
3. Agreement for Professional Services with RSG, Inc.