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2022-021 Parkland Dedication and DevelopmentMarch 25, 2022 Report No. 2022-021 INFORMAL STAFF REPORT TO CITY COUNCIL SUBJECT: Parkland Dedication and Development EXECUTIVE SUMMARY: City staff presented proposed updates to the parkland dedication and development ordinance to City Council on March 1, 2022. With this update, a new methodology was introduced that outlines the implementation of a new impact fee structure. Beginning in 2019, staff engaged the development community in Developer Town Halls and Focus Group meetings to help draft the ordinance and develop the proposed fee structure. In addition to these meetings, staff also held meetings with the Dallas Builders Association to review fee updates. The proposed ordinance and fee structure reflect current levels of park service and costs to acquire and develop park land. DISCUSSION: During the March 1, 2022, Work Session, City Council had several questions regarding the proposed updates to the ordinance. The summary below provides additional information and clarification to the discussion. Can affordable housing receive a reduction or waiver? Community Services is currently exploring incentives through an Affordable Housing Toolkit program. Staff recommends including park dedication and development in the review and as part of a comprehensive strategy for affordable housing. Additionally, modifications to the requirements can be made for individual projects or developments as appropriate through a Development Agreement. Could this impact growth in residential development? There are many contributing factors in predicting growth. The housing market today has changed significantly over the last two years. Interest rates and construction costs have heavily influenced the market. Low inventory in available homes continues to drive demand. Sales remain strong despite substantial increases in sale prices. Locally, the trend in demand and pricing mirrors the larger market and is expected to continue. Staff reached out to the City of Melissa, who recently implemented one of the highest park fees in the area, to discuss their experience. Melissa reported no negative impacts in permit sales and no negative feedback on the updated fee. Exhibit 1 includes the fee schedule for the City of Melissa which also has an assessment on ETJ properties. Staff also spoke to a local home builder who acknowledged seeing an increase in the return on investment under current market conditions. According to this builder, with advance notice of an implementation date for permit fee increases, the new costs could be factored in during several phases of development planning including design of the neighborhood, subdivision density, home March 25, 2022 Report No. 2022-021 concept, and pricing. In addition, staff talked to a local realtor, who commented that calls for realtor services exceeded 70 just in one day and who also anticipated the Denton residential real estate market to flourish for the near future. A recently listed property reflects the nature of the current market: On Thursday, March 17, Staff received notification of a property recently listed for sale. Staff was informed that the property had a purchasing offer for $250,000 per acre for the 25-acre parcel, making the total price offered $6,500,000. This parcel is located within the core of the city. This price per acre is significantly higher than the figure the Department has been receiving in appraisals as well as far above the value of land used in the calculations for the new fee structure in the proposed ordinance. Understanding the park requirements are one part of the development fee program, the park fees alone represent less than half a percent of the total construction cost of the average new home. The proposed ordinance also expands credits and provides flexibility in alternatives. Could we consider a phased approach? Phasing in the new dedication and fee structure is an option. The proposed dedication and fee structure is based on full cost recovery. A phased in approach will require continued subsidy to new park development and will impact the level of service. Policy direction on the level of subsidy, identification of alternate sources of funding, and maintaining levels of park service will be part of the discussion to phase in the requirements. If this direction is taken, staff recommends a three- year tiered structure to reach full cost recovery and to align full implementation with the first review of the assessments. Is the strategy to get more land or have developers build parks? The ordinance provides several strategies to achieve the purpose of providing park amenities that match the pace of growth and demand created by new residential developments. These strategies include but are not limited to the dedication of land, funds to purchase land, the ability for a developer to build a park, and the payment of a fee for the development of a park. The ordinance gives the City and developers the flexibility to work together to determine which strategy is best to meet the needs of the development, park zone, and planning objectives. For example, a developer –built public parks makes more sense in a zone where land availability is limited. Additionally, the construction of private parks can be beneficial in reducing impact in an area with established parks. The proposed ordinance allows City staff to adjust their strategies as needed based on the development and park needs. Dallas Builders Association Attached (Exhibit 2) is a letter sent to City leadership that provided feedback from the Dallas Builders Association (DBA). In addition, a response to the DBA is attached as Exhibit 3 that outlines the staff response to the questions submitted. Within this communication, questions were asked regarding the proposed costs to construct both a Neighborhood and Community Park. After review of the proposed expenses, staff made adjustments to the acres of irrigation, architect/design % and contractor profit %. Based on the March 25, 2022 Report No. 2022-021 new total construction costs, the impact fee will be adjusted to Single Family - $2,514.69 (Rounded up to $2,515) and Multi-Family $1,740.94 (Round up to $1,741). This is a reduction of approximately $200. CONCLUSION: Staff tentatively plans to present the proposed ordinance on April 19 for City Council consideration. ATTACHMENTS: Exhibit 1 - Park Dedication and Development Survey Exhibit 2 – Dallas Builders Association letters STAFF CONTACT: Gary Packan, Director, Parks and Recreation Gary.Packan@cityofdenton.com Laura Behrens, Grants Administrator Laira.Behrens@cityofdenton.com REQUESTOR: Council requested as a follow-up to a Work Session presentation PARTICIPATING DEPARTMENTS: Parks and Recreation and Finance STAFF TIME TO COMPLETE REPORT: (2) hours February 7, 2022 City of Denton Parks, Recreation and Beautification Board 215 E. McKinney St. Denton, TX 76201 Members of the Parks, Recreation and Beautification Board: The Dallas Builders Association (Dallas BA) represents more than 1,100 member businesses who engage in single- and multifamily residential building, land development and remodeling, as well as providing materials and real estate services. The Association serves a 10-county service region, including Denton County. With advance notice from city staff, Dallas BA has reviewed the draft of the proposed parkland dedication and park development fees ordinance. The item is scheduled for consideration in the February 7, 2022, Parks, Recreation and Beautification Board meeting agenda as item PRB22-008. Dallas BA offers the following concerns and comments. In summary, Dallas BA is concerned about the impact the significant increase in fees will have on already challenging new home costs. We are also concerned that the ordinance language does not include a key exception in applicability and does not give adequate credit for park-like facilities included in a development. Dallas BA requests clarification regarding park development cost allocations used in calculating park costs and fees. Significant Increase in Fees — While Dallas BA can understand that there is an increase in the Dedication Fee-In-Lieu and the Park Development Fee, due to the fee having not been updated in recent years, the proposed increases are significantly higher than what builders see in other nearby cities. The proposed park development fee is more than $1,000 higher than what is seen in other competitive cities and, at $2,753 per development unit, amounts to an increase of $2,462 per home. This cost, along with the increase in the fee-in-lieu, will ultimately be paid by the homebuyers, some of which are already Denton residents. It is important to note that these increases come at a time when the city is contemplating other fee increases, including roadway impact fees. Furthermore, these fees, as they are part of the final sales price of the home, actually cost more over the life of the home mortgage. Given the questions about the economy as we come through a pandemic, Dallas BA is concerned about the overall impact on Denton’s ability to remain competitive in the new home market. Dallas BA recommends lowering the fees and phasing them in over three years to reduce “sticker shock.” Replacement Homes Should Be Exempt — Dallas BA requests that “replacement” (home or structure) be added to the list of activities that have exceptions from applicability of the proposed ordinance in Section 22-34. These homes, as they are built on the location of an existing home that 5816 West Plano Parkway Plano, TX 75093 (972) 931-4840 Fax: (972) 267-0426 www.DallasBuilders.org is removed and replaced by the newly constructed home do not typically result in an increase in the number of dwelling units. In discussion with city staff, we feel there is an intent to offer this exception from applicability, however, the term “remodeling” could be seen as inadequate. Credit for Park-Like Facilities Included in a Development — Dallas BA recommends that more credit be offered towards the fee-in-lieu of land and park development fees paid by a developer when park-like facilities are included in a development. Dallas BA Requests Clarification Regarding the Following Park Development Cost Items: • The professional service and mobilization total charges of 42% are considerably high. • Irrigation estimates do not appear to exclude areas covered by paving, buildings/structures, and detention areas. Thank you for hearing our concerns. We believe that everyone deserves a roof over their head and an affordable place to live, and we invite Denton to utilize the Dallas BA as a resource on housing issues. Sincerely, David Lehde, Director of Government Affairs Dallas Builders Association February 28, 2022 Denton City Council City of Denton 215 E. McKinney St. Denton, TX 76201 Mayor Hudspeth and Members of the City Council: The Dallas Builders Association (Dallas BA) represents more than 1,100 member businesses who engage in single- and multifamily residential building, land development and remodeling, as well as providing materials and real estate services. The Association serves a 10-county service region, including Denton County. With advance notice from city staff, Dallas BA has reviewed the draft of the proposed parkland dedication and park development fees ordinance. The item is scheduled for a work session presentation in the March 1, 2022, City Council meeting agenda as item ID 21-2142. Dallas BA offers the following concerns and comments. In summary, Dallas BA is concerned about the impact the significant increase in fees will have on already challenging new home costs. We are also concerned about whether the language gives adequate credit for park-like facilities included in a private development. Dallas BA requests clarification regarding park development cost allocations used in calculating park costs and fees. Significant Increase in Fees — While Dallas BA can understand that there is an increase in the Dedication Fee-In-Lieu and the Park Development Fee, due to the fee having not been updated in recent years, the proposed increases are significantly higher than what builders see in other nearby cities. The proposed park development fee is more than $1,000 higher than what is seen in other competitive cities and, at $2,753 per development unit, amounts to an increase of $2,462 per home. This cost, along with the increase in the fee-in-lieu, will ultimately be paid by the homebuyers, some of which are already Denton residents. It is important to note that these increases come at a time when the city is contemplating other fee increases, including roadway impact fees. Furthermore, these fees, as they are part of the final sales price of the home, actually cost more over the life of the home mortgage. Given the questions about the economy as we come through a pandemic, Dallas BA is concerned about the overall impact on Denton’s ability to remain competitive in the new home market. Dallas BA recommends lowering the fees and phasing them in over three years to reduce “sticker shock.” Replacement Homes Should Be Exempt — In a letter to the Parks, Recreation and Beautification Board for Feb. 7, Dallas BA requested that “replacement” (home or structure) be added to the list of activities that have exceptions from applicability of the proposed ordinance in Section 22-34. These homes, as they are built on the location of an existing home that is removed and replaced by 5816 West Plano Parkway Plano, TX 75093 (972) 931-4840 Fax: (972) 267-0426 www.DallasBuilders.org the newly constructed home do not typically result in an increase in the number of dwelling units. In discussion with city staff, we feel there is an intent to offer this exception from applicability, however, the term “remodeling” could be seen as inadequate. We feel that the addition of “or to the rebuilding of a structure unless rebuilding results in an increase in the number of dwelling units” addresses this concern. Credit for Park-Like Facilities Included in a Development — Dallas BA recommends that more credit be offered towards the fee-in-lieu of land and park development fees paid by a developer when park-like facilities are included in a development. Dallas BA Requests Clarification Regarding the Following Park Development Cost Items: • The professional service and mobilization total charges of 42% are considerably high. • Irrigation estimates do not appear to exclude areas covered by paving, buildings/structures, and detention areas. Thank you for hearing our concerns. We believe that everyone deserves a roof over their head and an affordable place to live, and we invite Denton to utilize the Dallas BA as a resource on housing issues. Sincerely, David Lehde, Director of Government Affairs Dallas Builders Association