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9.C. - Page 8 <br /> 4. Balance of Benefits and Bonus. Striking the right balance between the public benefits and <br /> project bonus of a policy is tricky but essential work. A third-party analysis of the cost of the <br /> benefits and the development market can provide valuable data to inform what a good balance <br /> is. <br /> The City of Menlo Park, for example, conducted a financial feasibility study that determined the <br /> potential for additional benefits from private development that receive a FAR bonus. The study, <br /> conducted in Spring 2012 by Strategic Economics,determines the amount of public benefit <br /> available based on a pro forma model that solves for land value,using tested calculations for <br /> development costs and return on investment. The study ran pro forma models for a range of <br /> development scenarios to understand which project types would be most feasible. The study also <br /> tested the impacts of proposed density bonuses on residential development,and found that <br /> bonus generated a higher residual land value, suggesting it would be possible to develop a <br /> successful public benefits program. A link to the study is available in Appendix A. <br /> In the City if Berkeley,the bonus level was determined based on a market analysis using a range <br /> of development types (condo, apartments, office),heights, and parcel sizes,with assumptions <br /> made about land value. They used a developer pro forma model,as well,to solve for each <br /> scenario and determine what types of bonuses would maximize developer return, and therefore <br /> maximize potential to extract public benefits.A link to the study is available in Appendix A. <br /> While these analyses can provide good starting points,ultimately the right balance between <br /> benefits and bonus will depend on the priorities and goals for each city. For example,The City <br /> of Tampa provides an additional bonus for the public benefits that are most important to the <br /> community. A city may also choose to start out with low benefits and high bonuses to gain <br /> developer buy-in to the program, and slowly increase the benefit requirements over time. The <br /> City of San Diego, for example,recently increased their benefit requirements as the program <br /> proved successful. <br /> 5. Implementation. It is important to establish a clear procedure to implement the policy. The <br /> City will need to work with developers to create a process that is transparent,predictable, and <br /> expedient. One common way to accomplish this is to create a points or percentage based system <br /> or a simple formula so that developers can calculate the amount of bonus they will receive for a <br /> given benefit. San Diego, Portland,and Seattle all use this method. Perhaps the simplest way to <br /> implement a bonus program is to make additional FAR available for purchase, such as in San <br /> Diego. In that scenario,the City must establish a spending plan to make transparent how the <br /> funds will support needed public benefits. <br /> Depending on the structure of the public benefit bonus ordinance,there may be certain legal <br /> requirements that need to be met. For example,the City of Santa Monica is conducting a nexus <br /> study to ensure any legal considerations of their incentive zoning bonus program is addressed. <br /> For more on this, see the Santa Monica case study below. <br /> The ultimate success of a public benefits policy will depend on finding the "sweet spot" between <br /> maximizing the public benefits opportunity of a development and staying within the market bounds <br /> Page 3of15 <br />