CC 2022-09-13_9a Supplemental 1MEMOR ANDUM
TO: City Council
FROM: Timothy J. Carmel, City Attorne y
SUBJECT: Supplemental Information
9.a. - September 13, 2022 City Council Meeting
Discuss and Consider Introduction of an Ordinance Amending Title 16
of the Arroyo Grande Municipal Code (AGMC) Regarding Accessory
Dwelling Units; Development Code Amendment 20-001 and
Consideration of a Fee Waiver Program for Certain Accessory
Dwelling Units
DATE: September 12, 2022
The staff report for the above-referenced item includes a potential ADU Fee Waiver
Program beginning on page 9. It includes a discussion related to the applicability of
prevailing wages under California Labor Code Section 1720, as a result of a provision in
subsection (b)(4) that provides that a public works project is defined to include any
construction project “paid for all or in part out of public funds” which includes when
“fees…are paid, reduced, charged at less than fair market value, waived, or forgiven” by
the City.
Council Member Paulding has brought to our attention another subsection, Labor Code
Section 1720(c)(1), which provides an exemption for most private residential projects built
on private property. I believe that Council Member Paulding is correct and that the fee
waiver program would be exempt from prevailing wages.
In reviewing this issue, we had found the attached Accessory Dwelling Units Fee Waiver
Information and Application from the City of Santa Cruz, which indicates that prevailing
wages were required by its ADU fee waiver program and includes a California Prevailing
Wage Certification form. This was also echoed in a 2019 Western City article about ADUs,
which can be downloaded at the following URL :
https://www.westerncity.com/article/accessory-dwelling-units-help -increase-housing -supply.
We have contacted the Santa Cruz City Attorney to follow up and request clarification
regarding the prevailing wage issue and how their office came to the conclusion that they
apply. We will also contact the Department of Industrial Relations, since they are the final
word on the issue of payment of prevailing wages. Our office will continue to look into the
issue and will update the City Council at the next meeting, at which time we will provide
direction regarding the application of prevailing wages. I apologize for any confusion.
Attachment: City of Santa Cruz Accessory Dwelling Units Fee Waiver Information and
Application
cc: City Manager
City Clerk
City Website or Public Review Binder
P:\PLHR\Affordable Housing and Measure O\Fee Waivers\Forms and Information\Application\2019\2019 Fee
Waiver Information and Application 5Aug2019.doc
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ECONOMIC DEVELOPMENT
HOUSING AND COMMUNITY DEVELOPMENT DIVISION
337 LOCUST STREET, SANTA CRUZ, CA 95060 ● 831-420-5150 ● www.cityofsantacruz.com
2019
ACCESSORY DWELLING UNITS
FEE WAIVER INFORMATION and APPLICATION
Various types of City permit fees (see Exhibit “A” attached) may be waived In exchange for a
property owner’s agreement to restrict a new accessory dwelling unit (“ADU”) for rent to a low
or very-low income household. More fees are waived in exchange for an agreement to rent to
very-low income households as opposed to low income households. Estimated 2019 fees for a
500 sq.ft. ADU are approximately $14,464 (see Exhibit “B” attached). Please note that the list of
fees may not be all inclusive. Check with the Building and Safety Division for a specific list of
fees that apply to your project.
Prior to receiving a building permit, all ADU owners are required to execute and record an
“Accessory Dwelling Unit Affordable Housing Declaration of Covenants and Land Use
Restrictions - Fee Waivers”. This document regulates the establishment, use and occupancy of
the ADU, establishes the maximum allowable income of the tenant household, and the
maximum rents that may be charged, based upon the level of affordability (see Exhibit “C” and
“D” attached for 2019 levels). These restrictions are recorded against the property in perpetuity.
Owners submit an annual compliance report to the City certifying the tenant household’s
income and the rents charged.
Owners wishing to remove the restrictions in the future must pay any previously waived fees.
In order to obtain fee waivers, owners must submit a Fee Waiver Application (attached).
For additional information, please contact the City’s Housing and Community Development
Division at 831-420-5150.
Please note the following:
Under California Labor Code Section 1720(a) prevailing wage requirements
apply to any public works project, defined to include any construction project
“paid for all or in part out of public funds”. Per Section 1720(b)(4) a
construction project is paid for in part out of public funds when “fees…are paid,
reduced, charged at less than fair market value, waived, or forgiven” by the
City.
Accordingly, recipients of ADU fee waivers must require their contractors and
sub-contractors to pay state prevailing wage rates to their employees. Fee
waiver recipients are required to certify their compliance with this requirement.
P:\PLHR\Affordable Housing and Measure O\Fee Waivers\Forms and Information\Application\2019\2019 Fee
Waiver Information and Application 5Aug2019.doc
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EXHIBIT “A”
TYPES OF PERMIT FEES WAIVED
Santa Cruz Municipal Code Section 24.16.300
Only units designated as very-low or low income are eligible for fee waivers. The following list
may not include all fees specific to individual projects.
FEE TYPE
VERY-LOW INCOME
(0% - 50%
of median income)
LOW INCOME
(51%-60%
of median income)
Planning Application Fee
(Only if project is 100% affordable)
X
X
Planning Plan Check Fee
(Only if project is 100% affordable)
X
X
Building Permit Fee
X
Building Plan Check Fee
X
Parks Fee
X
Water Connection Fee
X
X
Sewer Connection Fee
X
X
Fire Fee
Application & Plan Check
X
Parking Deficiency Fee
(Only if located in the Downtown
Parking District)
X
P:\PLHR\Affordable Housing and Measure O\Fee Waivers\Forms and Information\Application\2019\2019 Fee
Waiver Information and Application 5Aug2019.doc
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EXHIBIT “B”
ESTIMATED 2019 ADU FEES
(Fees are approximate only and may vary for individual projects. Check with the
Building and Safety Division for a list of fees specific to your project. )
FEE TYPE
AMOUNT
Planning Plan Check Fee
$600.00
Building Permit Fees
$3,275.00
Building Plan Check Fee
$650.00
Parks Fee
$1,500.00
Water System Development Charge
$7,279.00
Sewer Connection Fee
$900.00
Fire Fee
$260.00
Total:
$14,464.00
P:\PLHR\Affordable Housing and Measure O\Fee Waivers\Forms and Information\Application\2019\2019 Fee
Waiver Information and Application 5Aug2019.doc
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EXHIBIT “C”
2019
MAXIMUM ALLOWABLE VERY-LOW INCOME (50% AMI) BY HOUSEHOLD SIZE
AND
MAXIMUM ALLOWABLE RENTS BY UNIT SIZE
ACCESSORY DWELLING UNITS
PER RESOLUTION NO. NS-22,856
BASED ON HCD INCOME LIMITS EFFECTIVE MAY 6, 20191
Household/
Unit Size
1 Person/
Studio
2 Person/
1-bedroom
3 Person/
2 -bedroom
STEP 1:
Very-Low
Income
Maximum
Allowable
Household
Income
$42,950 $49,100 $55,250
STEP 2:
Maximum
Allowable Rent
(if Owner Pays
all Utilities)
$1,074 $1,228 $1,381
VERY LOW INCOME HOUSEHOLDS
1. California Department of Housing and Community Development (HCD limits) effective May 6, 2019.
2. In accordance with the following, household assets must be considered when determining a household’s income:
a. If total household assets do not exceed the maximum allowable income shown above; no assets shall be counted.
b. If total household assets exceed the maximum allowable income shown, the value of those assets shall calculated in
accordance with the formula utilized by the Housing Authority of the County of Santa Cruz for the Section 8 Housing
Choice Voucher Program (0.44% of the net value of the assets or the actual earned income from the asset, whichever is
greater) and shall be added to the household’s actual gross annual income; that total shall be less than the maximum
allowable income shown above.
c. For households consisting of at least one person over 62 years of age, the first $60,000 of assets shall be excluded from
calculations under 2a and 2b above.
3. The gross annual income of a household (all household members) may not exceed the maximum allowable income shown
above by respective household size.
4. Table assumes landlord pays utilities and shows maximum allowable rent, which includes utilities. Utility costs are establish ed
by the Housing Authority of the County of Santa Cruz in conjunction with the Section 8 Rent Subsidy Program. If tenant pays
utilities, a utility allowance must be deducted from the maximum allowable rent.
P:\PLHR\Affordable Housing and Measure O\Fee Waivers\Forms and Information\Application\2019\2019 Fee
Waiver Information and Application 5Aug2019.doc
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EXHIBIT “D”
2019
MAXIMUM ALLOWABLE LOW INCOME (60%AMI) BY HOUSEHOLD SIZE
AND
MAXIMUM ALLOWABLE RENTS BY UNIT SIZE
ACCESSORY DWELLING UNITS
PER RESOLUTION NO. NS-22,856
BASED ON HCD INCOME LIMITS EFFECTIVE MAY 6, 20191
Household/
Unit Size
1 Person/
Studio
2 Person/
1-bedroom
3 Person/
2 -bedroom
STEP 1:
Maximum
Allowable
Household
Income
60% AMI
$41,160 $47,040 $52,920
STEP 2:
Maximum
Allowable Rent
(if Owner Pays all
Utilities)
$1,029 $1,176 $1,323
LOW INCOME HOUSEHOLDS
1. California Department of Housing and Community Development (HCD limits) effective May 6, 2019.
2. In accordance with the following, household assets must be considered when determining a household’s income:
a. If total household assets do not exceed the maximum allowable income shown above; no assets shall be counted.
b. If total household assets exceed the maximum allowable income shown, the value of those assets shall calculated in
accordance with formula utilized by the Housing Authority of the County of Santa Cruz for the Section 8 Housing Choice
Voucher Program (.44% of the net value of the assets or the actual earned income from the asset, whichever is greater)
and shall be added to the household’s actual gross annual income; that total shall be less than the maximum allowable
income shown above.
c. For households consisting of at least one person over 62 years of age, the first $60,000 of assets shall be excluded from
calculations under 2a and 2b above.
3. The gross annual income of a household (all household members) may not exceed the maximum allowable income shown
above by respective household size.
4. Table assumes landlord pays utilities and shows maximum allowable rent, which includes utilities. Utility costs are establish ed
by the Housing Authority of the County of Santa Cruz in conjunction with the Section 8 Ren t Subsidy Program. If tenant pays
utilities, a utility allowance must be deducted from the maximum allowable rent.
P:\PLHR\Affordable Housing and Measure O\Fee Waivers\Forms and Information\Application\2019\2019 Fee
Waiver Information and Application 5Aug2019.doc
ECONOMIC DEVELOPMENT DEPARTMENT
337 LOCUST STREET, SANTA CRUZ, CA 95060 ● 831-420-5150 ● www.cityofsantacruz.com
FEE WAIVER APPLICATION
ACCESSORY DWELLING UNIT
(complete and return to 337 Locust St., Santa Cruz, CA 95060
Attn: Housing and Community Development Division)
Property Owner Name(s):
Property Address:
APN:
Owner Phone:
Owner Email:
Building Permit
Application No:
Planner Assigned to Project:
Size of Proposed ADU: ____________ sq.ft
ADU Type: (check one) Studio 1-bedroom 2-bedroom
Primary Dwelling Type: (check one) 1-bedroom 2-bedroom
3-bedroom 4-bedroom
Income level ADU will be restricted to: (check one)
Very-low (50% of median income)
Low (60% of median income)
The following documentation must be attached to this application:
Legal Description of Property (may be obtained from a title report, deed of trust or a title
company)
Proof of Homeowner’s Property Tax Exemption (may be obtained from the Santa Cruz County
Assessor’s office)
Grant Deed - must identify all owners of the property (may be obtained from the Santa Cruz
County Recorder’s office or title company)
California State Prevailing Wage Certification (signed and dated by property owner)
_______________________________________ _____________________________
Property Owner Date
P:\PLHR\Affordable Housing and Measure O\Fee Waivers\Forms and Information\Application\2019\2019 Fee
Waiver Information and Application 5Aug2019.doc
California State Prevailing Wage Certification
Accessory Dwelling Unit
Fee Waiver Recipient Name: ___________________________________________________
Project Address: ___________________________________________________
Building Permit No: _______________________
1. Under California Labor Code Section 1720(a) prevailing wage requirements apply to any
public works project. Public works projects are defined as any construction project “paid for
all or in part out of public funds” and costing $25,000 or more.
2. Per Section 1720(b)(4) a construction project is paid for in part out of public funds when
“fees…are paid, reduced, charged at less than fair market value, waived, or forgiven” by the
City.
3. Accordingly, accessory dwelling unit (“ADU”) fee waiver recipients must require their
contractors and sub-contractors to pay state prevailing wage rates to their employees on
ADU projects costing $25,000 or more.
4. State prevailing wage rates are published by the State of California Department of Labor
Relations (“DIR”) at http://www.dir.ca.gov/oprl/DPreWageDetermination.htm.
5. Fee waiver recipients may only hire contractors and subcontractors registered with the State
of California Department of Industrial Relations at https://efiling.dir.ca.gov/PWCR/Search.
6. Upon awarding a contract for the construction of an ADU to a DIR-registered contractor, the
fee waiver recipient must register their ADU project with the DIR at
https://www.dir.ca.gov/pwc100ext/.
7. Upon project completion, fee waiver recipients must send a notice of completion to the DIR
at dircmu@dir.ca.gov.
8. Fee waiver recipients must provide the City of Santa Cruz with proof of compliance with the
above prior to or concurrently with obtaining the final building permit inspection.
The undersigned understands the above information and agrees to comply with the
requirements stated therein. The undersigned further understands that failure to comply
with the above requirements may result in the revocation of the City’s permission to
maintain an ADU on the fee waiver recipient’s property. Alternatively, the City may
require that any fees waived be reimbursed to the City with accrued interest at the legal
rate, and shall report the recipient to the California Department of Industrial Relations for
failure to comply with the above-cited Labor Code provisions.
__________________________________________ _____________________________
Fee Waiver Recipient Date