Commissioners discuss scaling residential impact fees under SB 5258; ADU and addition charges remain unresolved

At its April 16, 2025 meeting the Planning Commission considered proposed changes to the city's development impact fees to comply with Senate Bill 5258, which requires jurisdictions to scale certain impact fees according to residential building size.

Staff recommended using a square-footage basis for residential scaling after a consultant study because it avoids ambiguity about bedroom counts or individualized traffic analyses. "They recommended us to use the square footage basis because it's the simplest and, most uniform basis to apply impact fees," Giuliano, planning staff, said while describing the consultant FCS Group's analysis.

Commissioners discussed three key policy questions raised by staff: whether to continue exempting accessory dwelling units (ADUs) from impact fees; whether home additions should be charged (and, if so, at what threshold); and what definitions or credits the city should apply for lower-cost housing.

Major details and debate

- ADU exemptions: Staff noted the city has historically exempted ADUs in practice and that recent ADU rules allow up to two ADUs per single-family lot and up to 1,000 square feet per ADU (previously 800). Staff asked whether exemptions should continue. Commissioners were split: some favored continuing a broad exemption to promote housing affordability; others raised enforcement concerns if an ADU is created for sale. Several commissioners suggested treating a for-sale ADU (triggered by condominiumization) differently because the condominium step provides a point to collect fees. There was no formal decision; staff was directed to draft language that addresses the condominium/sale scenario and to seek legal and Department of Commerce guidance.

- Residential additions: Staff proposed charging additions that increase living area by more than 600 square feet, but recommended exempting smaller additions because of administrative complexity and limited revenue. Several commissioners expressed concern about penalizing homeowners improving an existing home and favored not charging for most additions. The commission directed staff to move toward exempting typical additions and to note that the policy differs from new construction.

- Income-based credits and exemptions: Staff proposed replacing a broad "moderate-income" exemption in the parking-related fee schedule with a narrower, low-income definition consistent with state guidance. Commissioners asked staff to return with an option for an intermediate definition/designation that is more rigorous than the prior "moderate" standard but not as narrow as the state low-income definition. Staff and the public-works director also recommended that larger exemptions for transportation impact fees be handled through negotiated development agreements rather than blanket code credits.

Other technical points

Staff said FCS Group calculated per-square-foot figures for transportation and park fees and used a benchmark median dwelling size of about 2,600 square feet; the proposal lowers fees for smaller units and raises them for larger units to aim for revenue neutrality over time. Staff also noted the state deadline for some compliance tasks and that the city received a state grant to pay the consultant.

Direction and next steps

Commissioners did not adopt final language. Staff was directed to draft proposed code text that continues to exempt ADUs in typical owner-occupied situations but that addresses condominium/sale situations and to return with alternative definitions for a "moderate" credit and with legal review from the city attorney and Department of Commerce guidance. Staff was also directed to keep additions generally exempt and to codify credit provisions for park improvements consistent with transportation fee practice. Staff said fee schedules will include an inflationary adjustment mechanism tied to CPI.

Ending

No formal vote was taken on the fee changes at the meeting. Commissioners asked staff to return with drafted ordinance language and revenue projections before the public notice and hearing so council and the public can see fiscal impacts.