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7.A. - Page 5 <br /> analysis considers a fee level that will not interfere with General Plan polices or <br /> suppress development opportunities which would result in lower overall fees paid to the <br /> fund. Feasibility analysis includes comparison to existing City fees, neighboring <br /> jurisdictions' fee levels and related citywide policies. <br /> FIGURE 3: FACTORS IN CONSIDERING FEASIBILITY OF FEE LEVELS <br /> Construction and Land Costs Market Conditions(Rental <br /> Rates and Sales Prices) <br /> FEASIBILITY <br /> Nearby City Fee Levels Existing City Fees <br /> Redwood City Results - Two separate studies were conducted for Redwood City — one <br /> for new commercial development (Commercial Linkage Fee) and one for new <br /> residential development (Residential Impact Fee). <br /> Commercial Linkage Fee: Office, R&D office and medical office (referred collectively <br /> throughout this report as "office"), retail, restaurant and personal service uses ("retail"), <br /> and hotels were all considered in the commercial study. Recent projects and pro forma <br /> analyses were used to determine construction costs and market value. Employment <br /> density was calculated to estimate the number of new worker households that require <br /> affordable housing. Affordability gaps were calculated for new worker housing, resulting <br /> in a maximum nexus fee of well over $100 per square foot for hotel and $200 per <br /> square foot for retail, restaurant and office uses. <br /> Further feasibility analysis determined appropriate fee levels (below this maximum) that <br /> maintain economic vitality and reasonable project cost. These factors include market <br /> capitalization rates, total City fee costs, and nearby city rates. Generally, the study <br /> looked for a total return on cost of 6.75 percent to 7 percent depending on development <br /> type. The study chose four different fee levels and tested them against the project <br /> assumptions to determine an appropriate fee level while maintaining project viability <br /> (pages 64-79 of the Commercial Linkage Report). Staff concurs with all the study's <br /> recommended fee levels. <br /> • Office — In the current market, office development has a particularly high return <br /> on cost, which allows for one of the highest recommended fees of $20/square <br /> foot, with an estimated return on cost of approximately 8 percent. This fee <br /> compares to $20/square foot in Cupertino, $25/square foot in Mountain View, <br /> $19/square foot in Palo Alto and $15/square foot in Sunnyvale. <br /> • Retail — Retail uses are more fee sensitive than office uses, with marginal levels <br /> of feasibility for a new fee. Viability may differ slightly for exclusively retail <br />