Daly City council accepts updated AB 1600 fee study but delays hotel fee decision

Daly City’s City Council on Nov. 25 accepted a consultant’s AB 1600 development impact fee justification study and voted to update the city’s development impact fee schedule while deferring the proposed hotel fee for later consideration. The decision was prompted by council concern that the consultant’s calculated per‑room hotel maximum could discourage hotel development.

The council heard a presentation from Richard Ruiz of DTA Consulting and city staff on a study intended to modernize impact fees last revised in 1999 (with a minor update in 2002). The study calculates maximum fees justified by a nexus between new development and needed public infrastructure. Staff recommended adopting the study, an annual construction‑cost escalator, and grandfathering building permit applications submitted before the hearing so projects in process keep current rates.

Under the consultant’s recommendations, residential impact fees would be set on a per‑square‑foot basis at $15.50/sf; commercial retail would mirror that rate at $15.50/sf, office $9.50/sf, industrial $8.50/sf and institutional/other $11/sf. Hotel fees were presented as a per‑room maximum (the consultant’s calculation was discussed at length), which multiple council members described as potentially “sticker shock.” Councilmembers said the hotel per‑room figure — a maximum the study indicates the city could charge under state law — might price projects out of Daly City and asked staff for more comparative and context data.

After deliberation the council withdrew the original motion and approved a revised motion to adopt the updated fee study and fee schedule for all categories except hotels; the hotel fee will remain at the existing nonresidential rate for now and be brought back for separate consideration, with staff and the consultant available to propose phase‑in options. Councilmembers and staff repeatedly emphasized that the study sets legal maximums; the council retains discretion to set lower fees or phase increases over several years.

Several procedural clarifications were included in the staff recommendation: permit applications submitted before the hearing would be grandfathered at existing rates; the city may adopt a 0–2% administrative component (staff recommended 0%); staff recommended an annual escalator tied to a California construction‑cost index; and the nexus study should be updated periodically. The council’s action preserves the city’s ability to update fees while pausing to gather more data on the hotel metric and consider phased approaches.

The council’s approval instructs staff to return with any required ordinance or fee schedule adjustments for inclusion in the master fee schedule and to present the hotel fee for separate review.