Tahoe/Placer County Parking Improvement District Study

Chapter 3
The In-Lieu Fee/Parking Improvement District Concept

As presented in Chapter 1, above, there are a range of potential benefits that can be provided by establishment of an in-lieu parking fee program. There are, however, also some disadvantages and potential pitfalls that must be considered. This chapter presents a review of the literature regarding such programs, a summary of existing programs in other jurisdictions, and a review of advantages/disadvantages as they relate to the North Tahoe region.

Driven in large part by efforts to reduce the impacts of parking on the urban design of commercial centers, there has been a substantial number of papers and articles written in recent years regarding in-lieu fees and parking districts. The bibliography of this document presents the most pertinent of these. Flexible Parking Requirements (Thomas P. Smith, 1983) provides a good summary of the "ingredients" necessary for success of an in-lieu program:

"The likelihood of success in the use of zoning that allows payments of fees-in-lieu of parking is increased when a community can anticipate a rapid rate of development in a concentrated area. Where major developments are proposed, it is more likely that sufficient funds can be collected to help support construction of off-street parking. The funds collected, however, should simply supplement a community's own resources (land, capital, personnel), and these funds should complement an existing program of municipally constructed off-street parking. Where development projects are to be constructed in a concentrated area and the public has the resources and administrative capacity to build and maintain centralized parking, the conditions may be appropriate for collecting fees-in-lieu of required parking spaces." (page 11)

This document also includes the following quote, that is very pertinent to the Kings Beach and Tahoe City commercial core areas:

"Off-site parking often can have its greatest application in older developed areas where small lots, multiple landowners, and physical constraints (site broken up by alleys, easements, existing street patterns) prevent the construction of on-site parking." (page 11)

Overall, the review of the professional literature revealed the following potential benefits associated with an in-lieu parking fee program:

• An improved urban design can be provided. A key concept in planning for pedestrian commercial districts is to provide as continuous a series of storefronts as possible, avoiding "dead spaces" that break up the window-shopping experience. By reducing the need for driveways and parking provided along the front of commercial properties (which is effectively required at present for those parcels without side or back access), an in-lieu program can result in a more effective and economically vital shopping district.
• The total amount of parking needed to adequately serve the area can be reduced. As public parking is available for shared use, the number of spaces required is lower than if each individual property must provide its peak parking supply on-site. For instance, restaurants can use a higher proportion of a public parking supply in their peak evening period while commercial properties can use a higher proportion in the afternoon. Another example pertinent to the study area is the use of parking for summer beach recreation parking needs as well as for winter snowmobile concessionaire parking needs.
• An in-lieu program provides another mechanism for the provision of parking, thereby reducing the need for variances. This helps to ensure that all landowners are treated equitably.
• Additional funding for public parking improvements is generated, potentially speeding the provision of additional public parking. Funding, moreover, accompanies the development that increases the need for such parking.
• By providing an additional, readily available option for developers to address the often-difficult issue of meeting parking requirements, an in-lieu program increases the feasibility of development or redevelopment - particularly for small lots.

Existing Parking In-Lieu Fee Programs

The concept of in-lieu parking fees is not a new one. For instance, the city of Toronto originally established their parking in-lieu fee program in 1963. The following presents a survey of existing programs, along with the most-recent available per-space fee (where available).

California Jurisdictions

• City of Berkeley - $10,000 (in 1999). Developers of lots under 30,000 square feet are required to pay the in-lieu fees rather than provide spaces on-site.
• City of Brentwood - $2,500 (in 2003).
• City of Carmel - $27,520 (in 1996), which is a requirement (no on-site parking is allowed).
• City of Concord - $8,500 (in 1999).
• City of Culver City - Fees are individually calculated at five times the per-square foot County-assessed valuation of the proposed development land times 300 square feet per parking space.
• City of Davis - Fees are set as "an amount equal to the value of the required parking on a per parking place basis" and must be expended only by the City to "acquire and/or develop on-street or off-street parking and related facilities which are determined by the City Council to alleviate the need for parking spaces in the core area" (Municipal Code 40.25.060). Interestingly, in the downtown core area, commercial projects are prohibited from providing parking on-site parking unless it is "below grade or incorporated into the building in another way" in order to improve the cohesiveness of the commercial area.
• City of Fairfield - In addition to establishing an in-lieu fee program (current fee is $6,268, increased annually by the Engineering News Record Construction Cost Index for the San Francisco area), Fairfield's parking code cuts parking requirements in half for development in the downtown area.
• The Town of Truckee's Development Code includes the following Section 18.12.070 - Downtown Commercial District Development Standards: "In-lieu parking fees. A parking impact fee may be paid at the discretion of the Director for uses in the DMU and DC districts in lieu of complying with Section 18.48.040 (Number of Parking Spaces Required). The amount of the impact fee per parking space shall be set by Town Council resolution." The current fee is around $5,600 per space, but Town Staff indicates that it is far below the actual cost of providing parking, which has been a problem in actually implementing parking improvements. To date, nine individual development projects have paid in-lieu fees, and these funds have been banked (although there are currently plans to use them as part of the downtown paid parking program). The Town generally will not allow a project to use the in-lieu fee for more than 50 percent of their required on-site parking.
• The City of Laguna Beach provides the option, in the downtown area, of providing parking on-site or purchasing "in lieu parking certificates" at a cost of approximately $8,000 per certificate.
• City of Manhattan Beach - The program allows in-lieu payment at the discretion of the developer for up to 20 spaces, but reserves the City Council's right to limit the use of in-lieu spaces over 20.
• City of Mountain View - As of 2000, fees were increase from $13,000 to $26,000 per space, based upon a $8 - $10M cost estimate for a new 350-space parking structure.
• City of Palo Alto - $17,848 per space (in 1999).
• City of Sacramento - City staff currently is developing recommendations for parking management in the Central City area, including the establishment of an in-lieu parking fee program. The parking management plan has been presented to City Council, which has asked for additional analysis and public input.
• City of Salinas - In-lieu fees are considered at the discretion of the Community Development Director for up to 20 spaces, but City Council approval is required for more than 20 spaces.
• City of San Jose - The "Downtown Parking Management Zone Off-Street Parking In-Lieu Fee Fund" is established to "only to acquire sites for, and/or pay costs of construction of, public off-street parking facilities in or near the downtown parking management zone" (20.70.385).
• City of Walnut Creek - $16,373 (in 1999), established as 75 percent of the construction costs (excluding land) associated with a parking space in a structure.
• Other California jurisdictions with in-lieu parking programs include Claremont, Hermosa Beach, Palm Springs ($9,250), and Pasadena.

Jurisdictions in Other States

• Town of Davie, Florida - Limited to 25 percent of total parking demand. The rate was established at $2,500 in 2004, rising at 5 percent per year. Developers can also provide excess spaces for public use (with certain restriction to ensure that they are truly useful to the public) and can receive $5,000 per public space provided.
• City of Bend, Oregon - This program is unusual in that a "tiered" in-lieu parking rate structure is charged in which up to 5 spaces are charged at $2,500 per spaces, 6 to 20 spaces are charged at $4,500 per spaces, and more than 20 spaces are charged at $7,000 per spaces. These fees can be financed over a ten-year period, and are not due until occupancy (rather than time of permit) guaranteed through a lien on the property. This program has been the source of concern among downtown business owners in the past, as the actual provision of new public parking has lagged. However, these funds are now being used to develop a new parking structure.
• City of Corvallis, Oregon - Decisions about allowing payment in lieu of construction is left to the discretion of the Community Development Director for projects not requiring a public hearing, but is under control of the Planning Commission and/or City Council for those requiring a public hearing. The fee was established at $3,500 per space in 2002, tied to the Engineering New Record Construction Cost Index, and is updated annually. This city's program is also interesting in that it allows the in-lieu fees to be paid in semi-annual payments over the course of up to ten years (at a 10 percent interest rate).
• Town of Jackson, Wyoming - This program was initiated in 1994 along with the adoption of minimum parking requirements, in response to the concern that requirement of on-site parking minimums would hinder development activity. Like the Bend program, the cost increases depending on the number of spaces required, from $1,000 for 1 to 4 stalls up to $10,000 per space for more than 40 stalls.

Common Characteristics of Fee In-lieu Programs

Based upon the review presented above, the following are the common characteristics of existing programs:

• A separate fund is established that is reserved for the future provision of publicly accessible parking spaces.
• The program is limited to non-residential land uses only.
• The program is available within a specified area only, such as a defined downtown zoning district.
• Payment is typically due prior to issuance of a building permit, or a certificate of occupancy if a building permit is not required.
• Strict standards for location of parking facilities are not defined (such as "spaces must be provided within 500 feet of each individual development parcel for which in-lieu fees are paid"), nor are specific locations established when the program is implemented. Instead, parking location decisions are made over time, reflecting the changes in need for parking and opportunities to provide parking. In other words, developers (or their lenders) are not guaranteed that a specific number of spaces will be provided within a specific walk distance.

Potential Disadvantages and Challenges

The following are possible reasons why an in-lieu fee program may not be appropriate:

• The timeliness of use of funds can be a challenge. PID programs have run into political trouble where fees have been collected for a long period before any parking spaces have been constructed. Areas where the expected number of projects that would take advantage of the in-lieu program is low may therefore not be appropriate locations for an in-lieu program. As the rate of inflation in construction costs and land prices can outstrip the interest rate gained on the funds, moreover, delays in construction can effectively degrade the ability of the program to result in parking supply. A long lag time between the first collection of funds and the provision of parking has been a problem for some jurisdictions, particularly for smaller communities. For instance, there has been discussion in Sisters, Oregon that the in-lieu program be terminated, as the City has not used the funds to construct public parking in over ten years.
• Parking must be provided in reasonable proximity to the properties contributing fees. To be effective for individual commercial property owners (and their financiers), spaces need to be provided with a reasonable walk distance of each property. Areas where there is no or limited opportunities for public parking facilities may find this to be a problem.
• An in-lieu program can be at odds with other parking strategies that allow reductions. For instance, the Standards and Guidelines for Signage, Parking and Design for the North Tahoe Community Plans indicates that "Parking requirements for uses other than single family dwellings may be reduced up to 20 percent if a traffic analysis indicates transit service exists within 300 feet of the property and such a substitute measure would be a viable substitute for parking." This can effectively reduce the funding to the in-lieu program by up to 20 percent.
• Sufficient funding needs to be available (either through the in-lieu program or from other sources) to ensure that parking is actually provided. Particularly if the first few developments taking advantage of an in-lieu program are relatively small (and therefore do not generate funds sufficient to construct a parking lot), this could require some initial public funding.
• Lenders need to be assured that the financial success of a development will not be limited or precluded by the lack of timely and convenient parking provided through the in-lieu program. Some lenders might be reluctant to lend on a project without on-site parking, or a guarantee for timely and convenient parking.
• The local jurisdiction needs to devote staff time to establishing and maintaining the in-lieu fee program. However, the ongoing staff time needed after the program is implemented is reported to be minimal, and would not require any marginal increase in staff levels. By providing a consistent means of addressing parking requirements (rather than through case-by-case review of private off-site parking agreements), moreover, local staff time spent on parking issues could potentially be reduced.

Setting the Fees

A key issue in an in-lieu fee program is the appropriate level of the fee. The professional literature, and the way in which fees are established in other California jurisdictions, indicates that there is not any legal requirement that fee levels be set to reflect the full cost of the provision of parking. Fees are set in one of two ways:

• Fees can be set on a case-by-case basis, calculating the cost of the land plus the cost of construction for a parking space. This has the advantage of ensuring that the fee fully reflects the cost of land (which can vary by location or over time), but has the disadvantage of requiring an appraisal on each application. As the appraisal might require four to six months, developers find it difficult to financially plan their projects. In high land cost areas, moreover, this can result in very high fees - an extreme example in Beverly Hills resulting in a fee (that was actually paid) of $53,000 per space.
• Per-space fees can be set uniformly for all projects. A recent survey of cities with in-lieu programs indicated that 37 of 46 cities have established a uniform fee (In Lieu of Required Parking, Donald C. Shoup). Most set their in-lieu fees lower than the cost of providing a public parking space, as the full costs were felt to be "too high." There is no legal constraint on how this fee is set, and the individual fees vary widely (as shown above).

Some programs also allow developers to remove existing parking spaces (thereby allowing other uses of the property) by paying the in-lieu fees, in order to encourage consolidation of parking into public lots as well as redevelopment of older properties. Finally, some jurisdictions (including Berkeley and Carmel) make the in-lieu program mandatory for development of some or all properties, prohibiting the provision of on-site parking.

Applying the Concept to North Tahoe

The general concepts presented above can be applied to the specific conditions in the two commercial districts, as a basis for evaluation of the appropriateness of the in-lieu concept to the study area. Considering the geography of the two areas and the conditions needed for an in-lieu parking program, the potential recommended PID areas shown in Figures 1 and 2 were developed for Kings Beach and Tahoe City, respectively. As shown, in both cases the district boundaries mostly coincide with the community plan areas. In Kings Beach, SR 267 is defined as the western boundary, as the community plan area to the west of SR 267 generally consists of larger parcels with limited potential for new development that could make use of a shared parking strategy. Similarly, in Tahoe City, the community plan area to the south of the Truckee River is too limited and removed from the rest of the potential development areas to generate the sufficient amount of off-site parking demand needed to warrant shared public parking. In addition, the State Recreation Area on the east side is excluded as not generating a need for off-site parking, as is the golf course property.

Some examples of the potential means by which a program could benefit individual properties helps to illustrate the potential usefulness of a PID:

• The Felte Service and Supply building sits on a parcel in a prime location on the northwest corner of Bear Street and SR 28. The parcel is only 25 feet in width and 122 feet in depth (3,050 square feet). The two-story building has approximately 5,800 square feet of floor area but only six on-site parking spaces, and development effectively covers 100 percent of the parcel. A reasonable possible re-use of this parcel would be to keep the existing footprint, but convert the ground floor to restaurant with professional offices above. At the County Code parking rates, this would require 35 parking spaces - or roughly 10,500 square feet of parking. The size of this lot would effectively preclude the ramps needed for underground on-site parking, requiring most if not all of the additional parking to be provided off-site.
  
  Another way to consider the impact of parking requirements on these small Kings Beach parcels is to evaluate how much development could occur on this lot if parking (fully meeting the code requirements) is required on-site. Assuming that providing parking beneath a building structure is not feasible, that the existing 100 percent coverage can be retained, and that a restaurant use is proposed, the maximum development that could occur would be roughly 700 square feet of building area (such as 35 feet by 20 feet), plus the required seven parking spaces.
• The Tahoe City Lumber Company is located on a parcel in the center of the Tahoe City commercial area. It sits on an irregular shaped lot roughly 95 feet in width, with a total land area of approximately 12,630 square feet and a single-story building of roughly 7,900 square feet. At present, the site provides on-site parking for 11 parking spaces (as well as some outdoor materials storage). One option for re-development would be for the existing building footprint to be used for retail space, with a second story of affordable housing units. The existing 11 spaces could be used for the residential units, while the retail use would require an additional 32 parking spaces that could not be provided on-site.
  
  Alternatively, if it assumed that all parking were to be required on-site (assuming 100 percent coverage, and affordable housing on a second floor that utilizes the existing 11 parking spaces), only 4,200 square feet of general retail could be provided along with the required 17 retail parking spaces on-site.

As both of these examples indicate, redevelopment of existing developed properties would require substantial amounts of parking to be provided off-site - even if the total floor area of existing building were not increased. These examples, moreover, are not atypical for the two commercial districts:

• As shown in Table 1, above, fully 36 of the 73 individual commercial establishments currently do not provide adequate on-site parking. Moreover, the feasibility of providing additional parking along with any increase in building program on the existing private sites is very limited, due to the small parcel sizes, limitations on coverage, interruption of groundwater associated with below-grade parking, height limit issues associated with providing building space above parking, as well as the sheer cost implications of structured parking/building configurations.
• While a detailed parcel-by-parcel evaluation of existing supply versus code requirements does not exist for Tahoe City, much of the same conditions pertain. Particularly for the 18 smaller commercial parcels along the north side of SR 28 between the Bank of America and Grove Street, existing land area is fully utilized to or beyond the TRPA coverage limits. The same factors listed above also largely preclude structured on-site parking options for most of these parcels.
• There are 32 commercial properties in Kings Beach with access solely provided by the state highway (no direct access to public streets on the rear or side). Redevelopment of these properties depending solely upon on-site parking would continue or expand on the "gaptoothed" pedestrian environment and additional driveways across the (future) sidewalks. On the other hand, providing an opportunity for off-site parking for these properties (as well as others) could help to provide the continuous window-shopping environment that best encourages commercial vitality in pedestrian shopping districts.
• Similarly, in Tahoe City all of the 18 commercial properties along the north side of SR 28 between Albertson's and the Pogan Gallery have public auto access only from SR 28, along with the 9 properties on the south side from Dave's Ski Shop to the Lighthouse Center.

Table 4 presents a simple evaluation of how each of the two potential districts compare with the guidelines for successful in-lieu programs discussed above:

• Does the commercial area have a substantial number of small or irregular-shaped parcels that make development with on-site parking difficult? This is definitely true for Kings Beach. As discussed in Chapter 2, Kings Beach includes many very small commercial properties (many parcels only 50 feet in width, and several only 25 feet in width) that makes it very difficult to assemble adequate land for commercial redevelopment. While true for some portions of the Tahoe City commercial area (largely north of SR 28 and west of Grove Street) other areas consist of relatively large parcels with less physical development constraints.
• Is there sufficient development demand to reasonably ensure that there will be multiple participants in an in-lieu fee program, providing significant fees in a timely manner? While this is a matter of conjecture (and impacted by external factors such as the national economy), one good indication is the fact that there are currently at least four active development proposals in Kings Beach that could

  TABLE 4: Application of In-Lieu Fee Guidelines to North Tahoe Commercial Districts District Meets the Guideline? Guideline Kings Beach Tahoe City Small Parcel Size That Makes On-Site Parking Difficult? Yes Partially Development Demand High Enough to Generate Substantial Participation in In-Lieu Program (#of Developments Expected To Make Use of Program in 5 Years) Yes Maybe Availability of Potential Public Parking Locations Within Reasonable Distance of Potential Developments Yes Maybe Benefit Associated with Provision of Consistent Window-Shopping Environment Yes Yes Active Public Program to Expand Public Parking Yes Yes Capacity in Public Agency to Administer Program Yes Yes Availability of Other Funds to Supplement In-Lieu Fee Program and Ensure Timely Provision of Parking Yes Yes Program Can Provide Useful Flexibilty to Developers, Aiding in Redevelopment Efforts Yes Yes

  potentially benefit from an in-lieu fee program. On the other hand, there are no such development proposals in Tahoe City (excluding the Tahoe City Marina project, which is planned to be served by on-site parking). As discussed in Chapter 2, moreover, the potential parking demand associated with future development in Kings Beach (under current allocations) is probably greater than that in Tahoe City.
• Are there feasible opportunities for development of new public parking facilities within a reasonable walk distance of parcels that may take advantage of the in-lieu program. As evidenced by the many potential parking lot sites identified for the Kings Beach Urban Improvement Project, there are many such opportunities in the Kings Beach area (particularly in the central and eastern portion where parking is most limited). New parking lot opportunities within the Tahoe City area (excluding the Jackpine Lot site already under development) are much more limited. In particular, if the Golf Course and Henrikson properties are excluded, the opportunities for new public parking between Grove Street and the Wye are small or none.
• Could the commercial district benefit from an improved window-shopping pedestrian environment? Providing such a "small town" streetscape is a key strategy for both commercial areas.
• Are there active efforts to expand public parking that could be aided by an in-lieu fee program? Particularly through Redevelopment, this is definitely the case in both areas.
• Does the public agency have the staff capacity to administer the program? Certainly, Placer County has these capacities, and has shown that addressing parking issues in the Tahoe commercial areas is an important priority.
• Are there other funding sources available to augment the in-lieu fee funding toensure that parking can be provided in a timely manner? Yes, funding is availablethrough Redevelopment, as well as other potential funding sources.
• Can a program make a substantial difference in making redevelopment projects feasible? This appears to be the case in both commercial districts, due to theexisting physical and TRPA regulatory limitations.

Considering all of these guidelines as a whole, it can be concluded that the Kings Beach commercial core area fully meets all guidelines for a successful in-lieu parking fee/PID program. A program in Tahoe City would be substantially more limited in scale, and would face substantially greater problems in identifying new public parking lot locations (again, excluding use of the Golf Course or Henrikson properties).

It is important to consider, however, that many of the benefits of an in-lieu fee program can be accomplished without establishment of a program. Specifically, the Standards and Guidelines for Signage, Parking and Design: Lake Tahoe Region of Placer County allows individual developers to enter into agreements with other private (or potentially public) landowners for provision of off-site, off-street parking, so long as this parking is either within a 300-foot walk distance or served by a shuttle service. For owners of constrained commercial parcels, this already provides the opportunity to consolidate parking off-site and avoid the streetscape and other impacts that could be associated with an on-site parking lot. However, the hurdles associated with finding and establishing an agreement (which requires a deed restriction) with another property owner are high, and in actuality few of these agreements have been established in North Tahoe. An in-lieu fee program effectively provides a means of reducing the "transaction costs" associated with joint development of parking.

It should also be noted that strategies that allow provision of parking below actual needs (such as those that require only a portion of parking demand levels be provided on-site or through in-lieu fee programs) are more problematic for North Tahoe than for many other jurisdictions, due to the prohibition of on-street parking on County roadways during the winter. While it may be reasonable for some of the parking need in a Bay Area jurisdiction to be accommodated on-street, this is not an available option in North Tahoe for winter parking.