To the Honorable, the City Council:
In response to Awaiting Report Item Numbers 10-173, 10-176, 10-180, 10-181 and 10-183, I report the following:
Several recent Council Orders have raised questions about the process or mechanism for the City to receive revenues negotiated during requests to change zoning for density increases. Several departments including Law, Assessing, DPW and CDD worked with the Manager's Office to draft a comprehensive response to the following Council Orders regarding a formula and a mechanism for obtaining community benefits:
CO #12, dated 11/1/10, Report on affordable housing as part of mitigation in zoning mitigation discussions
CO #3, dated 11/22/10, Report on the feasibility of creating a "bonding program" for the purpose of ensuring that a process exists to enable the completion of work on projects where a developer fails to comply with an agreed-upon community mitigation agreement.
CO #3, dated 11/22/10 and 12/14/10, Report on feasibility of developing a formula/mechanism for receiving revenues negotiated during zoning changes and the possibility that such revenues generated by a formula for distribution to community-based non-profits.
CO #13, dated 11/22/20 and 12/14/10, Report on the current formula that the City uses to calculate linkage payments for large scale projects.
CO #1 dated, 12/13/10 and 1/19/11, Report on state of the law relating to community benefits as mitigation in zoning amendments
This memorandum reports on recent mitigation activities and proposes a new process that, on balance, allows the city to capture meaningful community benefits without overburdening developers.
Recent requests have resulted in a range of what developers have provided as mitigation. For example, the Council negotiated mitigation with Boston Properties for the expansion of the Broad Institute site last summer. Neighbors and City Councilors negotiated with Alexandria during the Binney Street project.
In addition to immediate neighborhood impacts, there are citywide needs and benefits that could be considered in the development of appropriate mitigation. Some possible considerations include infrastructure projects for roadways, schools and other municipal buildings; energy reduction and sustainability programs; augmentation of human services, affordable housing and library programs; tree planting, parks, open space and beautification programs.
The Law Department was asked about the legal basis for negotiated mitigation for zoning requests. Usually mitigation negotiations occur when developers seek special permit approval for a site specific project. Negotiated community benefits during rezoning requests occur less frequently. The case of Durand v. IDC Bellingham, LLC, 440 Mass.45 (2003) is instructive. Based on this case, the Law Department advised that the City could proceed with developing a process for mitigation regarding the receipt of revenues arising from the zoning amendment process so long as procedural requirements were met and so long as there was no quid pro quo. (See attached memo dated April 14, 2011 from the Law Department)
Existing Site Mitigation
In addition to zoning mitigation, developers are often responsible for site specific mitigation during the special permit process. These site specific mitigation measures should be maintained and are not included in the mitigation process recommended below.
1. Site mitigation
When a developer seeks a Planning Board special permit, there are often site-specific impacts that need to be mitigated such as new water lines, storm water mitigation, sewer separation, street and sidewalk repairs, traffic signals and traffic calming, tree planting and open space. CDD staff coordinate with Traffic Parking and Transportation, Public Works and Water Departments to be sure that the site-specific mitigation is appropriate. These measures can add to the cost of a project, but reflect the additional impact that the new development has on city services and infrastructure.
2. Incentive Zoning
In addition to site mitigation, developers of certain types on non-residential developments are required to make an Incentive Zoning contribution to offset the impact of their development on the housing market.
Prior to enacting the Incentive Zoning Ordinance in 1988, the City conducted a nexus study to demonstrate the impact of commercial development in Cambridge on the city's housing market. The study quantified the increase in housing demand generated by new commercial development and the impact on housing prices associated with the increased demand, to establish the nexus between increased housing prices and new commercial development.
The Incentive Zoning contribution rate, originally set at $2/square foot, can be updated annually by the Cambridge Affordable Housing Trust based on changes in the CPI index, and can be fully reassessed by the City Council every three years based on "a consideration of current economic trends" such as changes in housing prices, commercial rents, and vacancy rates. Since 1988, the Incentive rate has been increased several times, most recently to $4.38/square foot in 2008 by the Cambridge Affordable Housing Trust.
An updated nexus study was conducted in 2002 to assess economic trends and changes in the impact of commercial development on the housing market. The study recommended increasing the Incentive Zoning rate to $7.83/square foot. However, the rate was not increased at that time. Given recent trends in development, it would be reasonable to repeat the nexus study to determine whether the Incentive Zoning contribution rate should be adjusted.
Zoning Mitigation Analysis and Funding Process
Given the desire to mitigate rezoning requests for increased density with impacts both in the vicinity of the rezoning area and citywide, this report suggests a mechanism and a process for balancing the rezoning requests with the impacts on affected neighborhoods, the city as a whole and the needs of developers and companies to grow the Cambridge economy.
Based on an analysis of recent negotiated community benefits resulting from rezoning requests, a mitigation fee of up to $10 per square foot for each square foot of increased floor area above what zoning allows is recommended. The per-square-foot amount may be adjusted at the time of the tri-ennial assessed valuation certification process by the Massachusetts Department of Revenue. This mitigation fee amount could be reduced for square footage devoted to publicly accessible open space and buildings and construction of affordable housing after analysis by City staff. Mitigation payments would be deposited into a city community benefit fund. Funds shall be distributed in the following manner:
- Fifty percent shall be used as neighborhood mitigation for impacts on the neighborhoods surrounding the rezoning area, exclusive of site-specific mitigation.
- Fifty percent shall be used for mitigation for impacts on the City's infrastructure and programs, exclusive of site-specific mitigation.
A Community Benefits Committee, appointed by the City Manager, would be responsible for making recommendation to the City Manager which programs, services and projects would be funded with mitigation funds. The Committee would chaired by the Deputy City Manager and include the Commissioner of Public Works, Assistant City Manager for Community Development, Assistant City Manager for Human Services or their designees, and three Cambridge residents. Terms for non-staff committee members would be for 3 years. The Committee would operate in a manner similar to the Community Preservation Act (CPA) Committee, holding a public hearing at least annually to determine which deserving city programs, services and projects might be funded with mitigation funds. By having a Community Benefits Committee make recommendation on the allocation of funds, the process would treat developers equally. It would allow developers to anticipate costs associated with rezoning. Finally, the mechanism and process would be transparent, allowing all parties to understand what is expected and how funds will be collected and distributed.
Attached for your review is a recommended Schedule of Payments.