CC RESOLUTION 4339RESOLUTION NO. 4339
A RESOLUTION ESTABLISHING IN -LIEU FEES IN ACCORDANCE
WITH THE EL SEGUNDO DOWNTOWN SPECIFIC PLAN.
BE IT RESOLVED by the Council of the City of El Segundo as follows:
SECTION 1: The City Council finds and declares as follows:
A. This Resolution is adopted in accord with the El Segundo Downtown
Specific Plan ( "DSP ") and the El Segundo Municipal Code ( "SPMC ") for
the purpose of establishing in -lieu parking fees;
B. The ESMC generally requires that new construction provide sufficient
parking to accommodate vehicle traffic generated from such construction;
C. The unique circumstances of the City's downtown, e.g., the number of
non - conforming small lots, can make it difficult for businesses to expand
since the ability to provide adequate parking is limited by available
acreage;
D. It is in the public interest for the City to provide options to persons seeking
to expand the size of their businesses to comply with the ESMC;
E. To fulfill this responsibility, the City adopted an in -lieu fee program that
allows business owners to pay a fee to the City to satisfy parking
requirements set forth in the ESMC;
F. This Resolution relies upon the documentary and testimonial evidence
submitted to the City during the public hearing held on November 5, 2003
in addition to such additional information that may be in the administrative
record;
G. The Report prepared by Rosenow Spevacek Group, Inc., dated June 12,
2003, regarding calculations of Downtown Parking Fees ( "Report") is
attached as Exhibit 'A" and incorporated into this Resolution by reference;
H. The Report concludes that the City may set an in -lieu parking fee as in an
amount not to exceed $37,693 per parking space;
The Council believes that establishing the full amount suggested in the
Report may discourage businesses from participating in the in -lieu
program and, accordingly, believes it is in the public interest to establish a
fee of a lesser amount; and
J. This Resolution relies upon the calculations, assumptions, analysis, and
conclusions set forth in the Report in addition to all other matters in the
City's records.
1
SECTION 2: Calculation of Parking Fees. The amount of parking fees that can be
paid to the City in accordance with the DSP ( "Fees ") is established at $17,500 per
parking space.
SECTION 3: Exempt under the California Environmental Quality Act. This
Resolution is exempt from review under the California Environmental Quality Act (Cal.
Pub. Res. Code §§ 21000, et seq.; "CEQA ") and CEQA regulations (Cal. Code Regs.
Title 14, §§ 15000, et seq.) because it establishes, structures, and approves rates and
charges to obtain funds for capital projects needed to maintain service within existing
service areas. This Resolution, therefore, is categorically exempt from further CEQA
review under Cal. Code Regs. Title 14, § 15273.
SECTION 4: Effective Date of this Resolution. The effective date of this Resolution
will coincide with the effective date of Ordinance No. -AA8 and will remain in effect
unless repealed or superseded.
PASSED AND ADOPTED this 5th day of Nove ber, 2003.
Mike Gordon, Mayor
APPROVED
By: t
Mark D. Hensley i y Attorney
ATTEST:
STATE OF CALIF NIA )
COUNTY OF LOS ANGELES ) SS
CITY OF EL SEGUNDO
I, Cindy Mortesen, City Clerk of the City of El Segundo, California, do hereby certify that
the whole number of members of the City Council of said City is five; that the foregoing
Resolution No. 4339 was duly passed and adopted by said City Council, approved
and signed by the Mayor, and attested to by the City Clerk, all at a regular meeting of said
Council held on the 5th day of November, 2003, and the same was so passed and adopted
by the following vote:
AYES: Gordon, Jacobs, Gaines, McDowell, Wernick
NOES: None
ABSENT: None
ABSTAIN: None
n�. V
,&.,4rW-P b
-en, City Clerk
2
R 0 S E N 0 W S P E V A C E K G R 0 U P I N C.
217 NORTH MAIN STREET
SUITE 300
SANTA ANA, CALIFORNIA
927014822
June 12, 2003
Mr. James Hansen
CITY OF EL SEGUNDO
350 Main Street
El Segundo, California 90245
TEL 714 541 -4585
FAX 714 836 -1748
EMAIL INFOGWEBRSG COM
WWW WEBRSGCOM
SUBJECT: DOWNTOWN PARKING FEE
Dear Mr. Hansen:
REAL ESTATE ECONOMICS
GOVERNMENT SERVICES
ECONOMIC DEVELOPMENT
REDEVELOPMENT PLANNING
HOUSING
REAL ESTATE ACOUISITION
FINANCING
Via E -mail
The City of El Segundo ( "City ") has requested Rosenow Spevacek Group, Inc. ( "RSG ")
to perform a preliminary financial analysis of the impact of making a parking fee option
available to downtown property owners. Property owners who wished to expand their
downtown commercial buildings could choose to pay this parking fee ( "In -Lieu Fee ") as
an alternative to providing the on -site parking that would be required by the Downtown
Specific Plan ( "Specific Plan "). This letter is written to summarize RSG's findings and
includes its recommendations.
BACKGROUND
El Segundo's downtown area suffers from deficiencies in on -site parking provided by its
older commercial properties. Commercial properties within the downtown area were
developed before current parking standards were imposed and often have little or no on-
site parking. By comparison, new commercial developments generally include sufficient
parking on -site to meet code and market requirements. Typically it is not feasibly for
owners of older commercial properties to add on -site parking because their properties do
not have sufficient vacant or undeveloped land area to accommodate the required
parking spaces. Without convenient parking for tenants and their customers, the older
commercial properties become obsolete and sell or lease at lower values than newer
properties that meet parking codes. These reduced revenues, values, and inability to
provide on -site parking discourage property owners from upgrading and expanding their
older properties.
In 2002, the City entered into a lease agreement with 612 Twin Holdings LLC ( "Twin
Holdings ") leasing 100 parking stalls within a parking structure to be constructed by Twin
Holdings. Once the parking structure is completed, the City will pay a one time charge
of $1,100,000 for its share of the cost of construction, commence paying $16,166.67 per
month base rent, and its pro -rata share of parking structure operating expenses
(combined hereinafter referred to as "Parking Rent "). Twin Holding's parking structure
will provide the parking stalls (leased) committed to the City and additional stalls for
other Twin Holdings tenants. The parking structure will be located at the intersection of
Grand Avenue and Richmond Street in downtown El Segundo.
F SCI Segundo0ownlown Parking Fee\Parking Report doc
Mr. James Hansen
CITY OF EL SEGUNDO
June 12, 2003
Page 2
ANALYSIS
The City's goal in securing the parking stalls is to provide parking for the public in
downtown El Segundo, and thereby making the downtown a more attractive place to
frequent. It is also hoped that downtown property owners will have more incentive to
invest in their properties and expand their square footages if they can shift their parking
obligations to the City parking structure. Other older downtown commercial areas in
Southern California have experienced resurgences, most notably Santa Monica,
Pasadena, and Huntington Beach. One of the elements that have led to these areas'
revitalization is that each of these respective cities has participated in providing public
parking.
In Old Pasadena, property owners seeking to expand their older buildings can pay a
parking credit fee of $150 per stall to avoid the obligation to provide on -site parking for
the expansion area. Once approved by the city, the property owner pays $119 per stall,
per year, to the city's parking authority to maintain this credit. These payments are a
token compared to the cost the property owners would face if they were to provide their
own parking, and effectively amount to a complete city subsidy of the parking
requirements. In return for this subsidy, Pasadena has benefited from a significant
increase in rents, building values, sales and property tax income, and transient
occupancy taxes in Old Pasadena.
Santa Monica by contract has assisted property owners in the 3rd Street Promenade
area by forming a business improvement district ( "BID ") to finance area improvements,
including parking structures. The property owners pay annually into the BID, which has
issued bonds and financed the construction of parking structures and other
neighborhood upgrades. The estimated cost of the BID to the property owners is from
$0.55 to $.60 per square foot, per year, for those property owners with properties along
the Promenade.
In downtown Huntington Beach, property owners can pay an in -lieu fee of approximately
$15,000 per stall as an alternative to providing on -site parking. The City, through its
redevelopment agency, has constructed a parking structure to meet the demand
generated by downtown visitors.
In all three cities, visitors pay for parking their vehicles in the parking garages in
accordance with local market conditions, although participating merchants can validate
parking for their customers.
F T1 Segundo\Downtown Parking Fee\Parking Report doe
Mr. James Hansen
CITY OF EL SEGUNDO
June 12, 2003
Page 3
Other cities also have an in -lieu fee option available for property developers. City staff
has recently performed a survey of some of these fees and identified the following fee
structures:
City
In -Lieu Fee Per Stall
Manhattan Beach
$28,937
San Luis Obispo
$11,000
Mountain View
$26,000
West Hollywood
$20,000
Hermosa Beach
$12,500
Beverly Hills
$15,000 - $25,000*
*Fee varies depending upon location within
Beverly Hills
Cities in California have wide latitude in setting development fees. California
Government Code Section 54031 authorizes cities to invest in parking, and Section
54033 authorizes cities to make parking available to the public. In addition, Government
Code Section 66005 provides that a city may impose a fee as a condition for its approval
of a development provided the fee does not exceed the city's reasonable cost of
providing the service or facility for which the fee is imposed. Therefore, the City may
invest in parking facilities, and impose a development fee in an amount of up to its cost
of providing the facility or service upon those developers who choose to utilize the
facility.
The estimated cost per stall of the City's lease at the Richmond and Grand parking
structure is as follows:
Therefore, the City can impose an In -Lieu Fee of up to $37,693 per stall.
F AEI SegondoDowntown Parking FeeTarking Report doc
Totai Cost
Cost Per Stall
Construction Contribution (one time)*
$1,100,000.00
$11,000.00
Monthly Base Rent (land)
16,166.67
161.67
Estimated Monthly Operating Expenses
2,500.00
25.00
Monthly Income Offset
(2,000.00)
(20.00)
Total Annual Cost
200,000.04
$ 2,000.00
Total cost over 34 years (including 2%
6,774,306.00
67,743.06
inflation on expenses, 2.5% on income
offset)
Purchase Option (one time, at end of
200,000.00
2,000.00
lease)
Total Current Dollar Costs **
$3,769,286.00
$37,693.00
* City's share of construction costs shall not
exceed $11,000 per stall, per lease
terms, although Twin Holdings estimates the City's actual share to be $15,386 per
stall, excluding land.
** Present value at 6% per vear discount rate
Therefore, the City can impose an In -Lieu Fee of up to $37,693 per stall.
F AEI SegondoDowntown Parking FeeTarking Report doc
Mr. James Hansen
CITY OF EL SEGUNDO
June 12, 2003
Page 4
One of the reasons the City executed the parking lease was to stimulate additional
commercial development in downtown El Segundo. This City parking may stimulate
additional development if: (i) additional development is feasible, and (ii) the City In -Lieu
fee is less expensive to the developer than the alternative of providing parking through
other means. The City In -Lieu Fee can turn an infeasible project feasible if the cost
difference between the In -Lieu Fee and the developer's cost of developing parking
covers the gap in feasibility. However, rents in downtown must be high enough to make
this gap relatively narrow.
RSG has prepared a preliminary pro -forma which is attached to this report as Exhibit A,
which analyzes the feasibility of a potential commercial building expansion. The pro
forma analyzes the potential costs of adding 3,000 square feet to a theoretical 7,500
square foot building that does not have sufficient land area to provide parking stalls for
the expansion. The pro forma is based upon the assumption that the expansion will be
for office space that will require one (1) parking space per 300 square feet of addition, or
10 parking stalls. Without sufficient land to provide this parking, the property owner will
need to acquire a nearby parcel and develop it into a parking lot. RSG's cost estimate
for acquiring an additional parcel and developing it into a parking lot is attached as
Exhibit B, indicating a cost per stall of $18,915 per stall. This cost presumes that there is
a vacant parcel available downtown that can be purchased for $45 per square foot. If
there are no vacant parcels, then the cost of acquiring a parcel improved with a building
and tearing down the building to develop a parking lot would be prohibitively expensive.
RSG's pro forma indicates that at the rental rates, values, and development costs
utilized in the analysis, an In -Lieu Fee of up to $9,843 per stall, rounded to $10,000 per
stall, would be feasible. Since this fee is below the projected cost of $18,915 per stall
that an owner would otherwise encounter to acquire parking, it would improve the
feasibility of an expansion project.
The City may wish to provide a larger stimulus to downtown development then a
$10,000 per stall fee would provide. The lower the In -Lieu Fee, the more stimulus will be
provided. However, Pasadena has discovered that if a fee is kept at a low rate for too
long, it becomes politically difficult to raise it. Old Pasadena has experienced such a
significant increase in rents and building values that a significantly higher parking fee is
feasible. However, when the city recently tried to raise the parking fee, the property
owners were able to apply sufficient political pressure to defeat the increase. Therefore,
RSG recommends that an In -Lieu Fee be set at its cost per stall, but provide a
significantly lower fee in the short term so as to stimulate immediate development. This
high fee coupled with a lower interim fee schedule would provide a development
stimulus while allowing the City the flexibility to in effect, easily raise the fee in the future.
F AEI Segundo\Downtown Parking FeeTarkmg Report doc
Mr. James Hansen
CITY OF EL SEGUNDO
June 12, 2003
Page 5
SUMMARY
• The City's cost per stall for the downtown parking structure is $37,693 per stall,
including $11,000 per stall for its share of construction costs, and $26,693 for
other costs, including ground rent, over the 34 year lease term.
• The City can impose an In -Lieu Fee of up to $37,693 per stall.
• An In -Lieu Fee of $10,000 per stall or less will be required to stimulate
commercial development downtown.
• If the City sets the In -Lieu Fee too low, it may be unable to raise it in the future.
RECOMMENDATIONS
• Provide downtown property owners the option to pay an In -Lieu Parking Fee as
an alternative to providing on -site parking in accordance with the Specific Plan.
• Set the In -Lieu Fee at $37,693 per stall.
• Provide for temporary reduced rates ( "Incentive Rates ") in the initial years of the
In -Lieu Fee program to stimulate commercial development downtown. RSG
suggests an Incentive Rate structure as follows:
o $7,500 per stall for commercial developments that are issued a building
permit on or before December 31, 2008 and receive a Certificate of
Occupancy on or before December 31, 2009.
o Provide for the automatic sunset of the Incentive Rate program by
December 31, 2008, unless extended or amended by the City Council.
o Adjust or extend the Incentive Rates depending upon the demand for the
stalls by downtown property owners and developers, and the goals of the
City (i.e., cost recovery versus economic development).
o Do not allow property owners to buy and trade City parking stalls among
themselves; the City should remain in control of the City stalls.
F \CI Segundo0owntown Parking Fee\Parking Report doc
Mr. James Hansen
CITY OF EL SEGUNDO
June 12, 2003
Page 6
Thank you for the opportunity of reviewing the parking program on your behalf. We will
make ourselves available for discussion if this would be of assistance.
Yours truly,
ROSENOW SPEVACEK GROUP INC.
Felise Acosta Tim Mulrenan
Principal Director
F SCI SegundoZowntown Parking FeeTarkmg Report doc
EXHIBIT A
COMMERCIAL EXPANSION PRO FORMA
Assumptions underlying the following pro forma are as follows:
• Existing building size 7,500 square feet, expansion of 3,000 square feet
• Existing land parcel 8,500 square feet
• Downtown office rents as follows:
• Existing rent - $1.75 per square foot per month, triple net
• Expansion (new space) rent - $2.25 per square foot per month, triple net
• Shell construction costs $70 per square foot
• Tenant Improvement costs $25 per square foot
• Parking costs $18,915 per stall
• Soft costs $90.51 per square foot of expansion space
• Capitalization rate 8.0%
• Land Value $45 per square foot
• Building Value $240 per square foot before expansion, $255 per square foot
(including expansion space) after expansion
F AEI Segondo\D —tow Parking FeeTarkmg Report doc
El Segundo
Feasibility of Downtown Office Building Expansion
Potential Building Value
Income:
Rent 7500 sq. ft. @ 1.85
3000 sq. ft. @ 2.25
Vacancy & Collection Losses @
Gross Effective Income
Operating Expenses:
Management
Reserves
Non - Reimbursables
Subtotal - Operating Expenses
Net Operating Income
Capitalization Rate
Value
Value /Square Foot
F T1 Segundo\Downtown Parking FeeTarkmg Report.doc
Existing
Building Expansion Total
Annual Annual Annual
NNN /month 166,500
NNN /month 81,000
247,500
5.00% (8,325) (4,050) (12,375)
158,175 76,950 235,125
5.00% (7,909)
(3,848)
(11,756)
2.00% (3,164)
(1,539)
(4,703)
2.00% (3,164)
(1,539)
(4,703)
(14,236)
(6,926)
(21,161)
143,939
70,025
213,964
8.00%
8.00%
8.00%
$1,799,241
$875,306
$2,674,547
$240
$292
$255
El Segundo
Feasibility of Downtown Office Building Expansion
Potential Building Cost
Existing Property Value /Acquisition Cost
Expansion Costs:
Without With
In -Lieu Fee In -Lieu Fee Difference
$1,799,241 $1,799,241 $0
Shell
3,000 sq. ft. @ $70 per sq. ft.
210,000
210,000
$0
Parking
10 stalls @ 18,915 per stall
189,154
15,000
($189,154)
On & Off -Site Costs
lump sum estimate
5,000
5,000
$0
Tenant Improvements
3,000 sq. ft. @ $25 per sq. ft.
75.000
75.000
L0
Subtotal - Hard Costs
22,500
479,154
290,000
($189,154)
Soft Costs:
Architecture & Engineering
10.00% of hard costs excluding parking
29,000
29,000
$0
City Fees
$5.00
per square foot estimate
15,000
15,000
$0
Other Fees
$2.00
per square foot estimate
6,000
6,000
$0
Legal & Accounting
$7.50
per square foot estimate
22,500
22,500
$0
Loan Points
1.50%
of total costs
36,542
33,562
($2,980)
Interest
6.50%
per year of total costs, 9 months
118,530
112,125
($6,405)
Commissions
$5.00
per square foot
15,000
15,000
$0
Consultants
lump sum
estimate
5,000
5,000
$0
Contingency
5.00%
of hard costs
23.958
14.500
($9,458)
Subtotal - Soft Costs
271,530
252,687
($18,843)
Total Costs Excluding "In-
Lieu"
Fee and Profit
2,549,924
2,341,928
($207,997)
Profit
10.00%
of costs
254,992
234,193
($20,800)
Total Costs Excluding "In-
Lieu"
Fee
2,804,917
2,576,120
($228,796)
Value
2,674,547
2,674,547
$0
Feasibility Gap
(130,370)
98,426
$228,796
Potential "In- Lieu" Parking
Fee
NA
98,426
Fee Per Stall
$9,843
F 1E1 Segundo\Downtown Parking FeeTarktng Report doc
EXHIBIT B
El Segundo
Feasibility of Downtown Office Building Expansion
Potential Cost of Parking Stalls
Number of Stalls
Land Acquisition
Improvements
Design
Permits
Interest
Legal & Accounting
Contingency
Total
3,500 sq. ft. @
3,500 sq. ft. @
lump sum estimate
10
$45.00 per sq. ft.
$4.00 per sq. ft.
lump sum estimate
6.5 %. 6 months, no points
lump sum estimate
F \GI Segundo\Downtown Parking FeeTarkmg Report doc
Amount
Cost/Stall
$157,500.00 $15,750.00
$14,000.00
$1,400.00
$5,000.00
$500.00
$1,000.00
$100.00
$5,954.00
$595.40
$5,000.00
$500.00
$700.00
$70.00
$189,154.00 $18,915.40