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HomeMy WebLinkAbout10-05-1992 PC MinutesMINUTES Planning Commission City of Orange October 5,1992 Monday - 7:00 p.m. PRESENT: Commissioners Alvarez, Bosch, Cathcart, Murphy, Smith ABSENT: None STAFF PRESENT: John Godlewski, Administrator of Current Planning; Gary Johnson, City Engineer; Bob Herrick, Assistant City Attorney; and Sue Devlin, Recording Secretary PLEDGE OF ALLEGIANCE IN RE: MINUTES OF SEPTEMBER 21. 1992 Moved by Commissioner Smith, seconded by Commissioner Bosch, to approve the Minutes of September 21, 1992 as recorded. AYES: Commissioners Alvarez, Bosch, Cathcart, Murphy, Smith NOES: None MOTION CARRIED IN RE: PRESENTATIONS Commissioner Bosch read a resolution commending Carmine Master for his service to the community. Moved by Commissioner Bosch, seconded by Commissioner Murphy, to adopt Resolution No. PC 53-92, a Resolution of the Planning Commission of the City of Orange commending Carmine Master for his outstanding service to the City of Orange, adopted this 5th day of October, 1992. AYES: Commissioners Alvarez, Bosch, Cathcart, Murphy, Smith NOES: None MOTION CARRIED Mr. Master appreciated the award and made a few brief comments. Chairman Cathcart noted Don Scott was not in attendance to receive his resolution. Moved by Chairman Cathcart, seconded by Commissioner Murphy, to adopt Resolution No. PC 52-92, a Resolution of the Planning Commission of the City of Orange commending Don Scott for his outstanding service to the City of Orange, adopted this 5th day of October, 1992. AYES: Commissioners Alvarez, Bosch, Cathcart, Murphy, Smith NOES: None MOTION CARRIED Planning Commission Minutes IN RE: CONTINUED HEARING October 5, 1992 ZONE CHANGE 1151-92 -CITY OF ORANGE ON BEHALF OF 19 PROPERTY OWNERS A request to change the zoning classification from R-2-6 Residential Duplex District to the R-4 Residential Maximum Multiple Family District for the property. Subject property consists of 19 parcels located north of Palm Avenue on both sides of the 300 North Olive block and the east side of the 300 North Lemon Street block, exclusive of the Orange Unified School District Headquarters property. N TE: Negative Declaration 1408-92 has been prepared to address the environmental impacts of this project. This item was continued from the May 4, July 6 and July 20, 1992 meetings.) Jere Murphy, Manager of Advanced Planning, made a few general comments and then asked Mr. Herrick and Mr. Ryan to present information on the lot yield memo and the economic analysis. This item was continued to allow the staff to, with the assistance of economist/consultant AI Gobar, prepare an analysis of the economic value of various development alternatives feasible for typical lots in the Old Towne area. This study was requested by the Commission, not only as it relates to the zone change in question, but also to the re-zonings being requested in the Southeast and Southwest Quadrants of Old Towne. In addition to the two alternatives previously discussed in the original staff report, that of the existing R-2-6 zoning on the property and the R-4 residential maximum multiple family district, there are other alternatives. Staff has suggested one additional alternative to the Commission. Because 17 of the 19 lots in the area are single story buildings, new development will probably be restricted in height from, a bulk and mass standpoint in order to be compatible with the existing development in the area. Through the discretionary review process most of the buildings are anticipated on both sides of Olive Street and on the east side of Lemon Street to be limited to either one story or perhaps one and two story on the east side of Olive Street, as the properties back up to the commercial zoning on Glassell. This general format would provide for a one story streetscape on both Lemon and Olive even if there was a combination in some cases of one and two story development. Using the R-3 district zoning with the existing General Plan for the area, which is low- medium density, 6-15 dwelling units per acre, would allow for a maximum of three dwelling units on a typical lot, with the majority of those units being smaller units (1 bedroom). The R-C-D overlay zone would also assist in maintaining privacy, bulk, mass and height of buildings credibility with the neighborhood. There are at least the three alternatives before the Commission; one being the R-2-6 district, another to being re-zoned to the R-4 district; third, to re-zone to the R-3 R-C-D district, which probably more correctly relates to the type of development that might be allowed on the properties based on both the development standards and the discretionary review of projects in the area. The Negative Declaration on the zone change was approved by the Commission on May 4, 1992. Regarding the economic analysis, the findings are that the cost of land and new construction vs. rents received equates to a negative cash flow in almost every case, except where a second unit is added to an existing residence. It appears that the construction costs and cost of land is one of the major reasons why there has not been any significant amount of new re-use of land within Old Towne. The analysis is massive in size. Looking back at the process, if they knew then what they knew now, they would not have taken on the study in the first place, 2 Planning Commission Minutes October 5, 1992 particularly in the time period that was available to prepare the study. It's only because there is special expertise on the part of the staff that they were able to attempt to do this sort of study. Mr. Herrick stated at the prior study session the Commission had asked staff to respond to three basic questions regarding General Plan density. He briefly summarized the memo of September 30, 1992. The questions were: What was the reason for using gross area to calculate the number of units permitted under the General Plan density designation? How are fractions of units dealt with when calculating permitted development on a particular parcel under the General Plan? In what way, if any, are overbuilt units taken into account when considering a proposed development on a particular parcel that is not yet built to the General Plan density? The answer to the first question is simply it's a function of the nature of the General Plan. General Plans are policy level documents designed to provide overall parameters for broad areas of the City. They do not take into account the alignments of local streets and other areas that may be coming out of usable space. The General Plan deals with gross acreage and not net usable lot space. The zoning ordinances provide more particular parameters and the suggestion that the two standards ought to strictly agree with each other would make the General Plan level exercise fruitless in that the General Plan would become a reflection of the zoning ordinance. Under a flexible General Plan several different zones can fit within that General Plan designation with a more definitive effect on what can be built there. The second question, fraction of units under the citywide policy, has been in effect for some time. The additional unit is permitted when the fraction that is left over is larger than 3/4 the unit. The reason for that is to permit the somewhat smaller lots in the City to fit the equivalency yield between those areas and the more standardized areas without unbalancing the General Plan by allowing an unaveraged overbuilding. The third question, how does overbuilding on surrounding parcels affect a particular project on a parcel. It just basically is not taken into account. If the parcel is overbuilt under the old General Plan, it's a legal non-conforming use and the assumption is that it will be brought into conformance with the new General Plan at such time as it is redeveloped in the future. If it's overbuilt because of the averaging, then it is considered to be in compliance with the General Plan and there is no reason to apply it to a neighboring lot. If it were overbuilt illegally, then the remedy is for the City to enforce it's ordinances; not to penalize a new proponent for someone else's illegal activity. Dan Ryan, Senior Historic Planner, stated the basic report deals with financial scenarios developed for the Olive Street area and that's part of the economic study for the five zoning areas of Old Towne. Each of the scenarios reflect as built or approved projects found in various sized lots in each of the five study areas. Maximum unit size and yield were figured into all new construction scenarios. A proforma was developed to show the standard types of development, hard and soft construction costs, development of off sites, public improvements, construction financing, points, permanent financing, equity requirements, operating expenses, taxes, debt service, net operating income, net operating profit, loan to value, and internal rate of return. To get to the last item, internal rate of return, you have to do all the other stuff. There were several categories included that related to preservation incentives, which the Commission asked for. One of those is the Mills Act Tax Adjustment, which would reduce property taxes between 40 and 70 percent. For those properties which are qualified historic structures on a 10 year basis renewable each year, based on a contract that the owner would sign with the City to make certain repairs to increase the life and restore the building. That agreement would need to be worked out with the County Tax Assessor to figure the exact tax savings. To date, there have been no projects that qualified for rehabilitation tax credits 3 Planning Commission Minutes October 5, 1992 on income producing single family residences, but there has been one contract in the City of Orange for a facade credit where they donated the restricted value of the facade building. In that case, it was a $40,000 outright tax credit for that facade. That's basically valued at 15% of the market value for the building. He described some of the projects. There were four various detailed items on the matrix and they reflect various projects that are typical of Old Towne in the study area. Demolition of an existing structure and the construction of a new three unit single story apartment on a 7260 square foot lot, with two one-bedroom and one two-bedroom units. Anew unit on a 660 square foot lot with one two-bedroom unit. They also combined an existing single family residence with the same detached second unit and gave information as far as an existing single family historic structure. On the financing, several rates were used but they decided to compute all of them at the same rate for ease of computing purposes -- it was figured at 9.5% for 25 years amortization. This is based on projects completed between 1990 and 1991. Currently you would figure one basis point less for loans because the interest rates have come down. The consultant was very generous when computing rents. They figured 16% higher for the rents than the actual figures obtained to allow some latitude. They also reduced the amount of operating expenses (typically they were $3.50 per square foot), but then you would charge management fees (5%), and replacement reserves. Operating expenses included property tax, maintenance, advertising, operation costs, cleaning, electric, trash, etc. One of the basis to determine value would be to look at the income approach. There are several ways to do that. One, would be to take the value of the net operating income (not including debt service) and multiply it by a figure of 0.095. This gave them an idea of what the market value of the building is worth. Typically bankers will loan around this amount or about 20% higher. To make the presentation complete, and the next financial presentation will be to figure the exact net present value, and a return on the investment were both tax credits and for each scenario based on the cost of the land. The cost of the land was not figured for the return on the operating costs. When you purchase a property (staff figured 205,000 for acquiring property) and that was based on 1990/91 figures -- it was kind of low. Since there are different prices for each of the different quads, they took an average. If you demolished that property you would be losing about a $55,000 basis in the building. The land would be worth about $150,000. The loss in revenue for that would be about $3,075 or $3,200 depending on what the rents are per year tax free. When you do new construction you are also starting out in the hole. But when you add a second unit, you are ahead because you keep the existing building and the rents for that. They found out it was more expensive to build in Old Towne. Part of that is the materials used, the review and design work required. They compared projects within the Square Mile and a couple hundred feet outside the Square Mile. Projects for construction range between 8 and 12 percent higher. Construction costs range from 69 to $109 a square foot. Staff reviewed 15 to 18 projects. They found an average range of $79.10 to $87.33 per square foot. It was interesting to note on the different 4- unit, 3-unit, 2-unit and 1-unit projects, there were different construction costs. They grouped the projects they reviewed and came up with costs for those particular projects. Staff went through every permit application and had to go through the different Departments -- Water, school facility fees, TSIP fees -- he didn't realize how many fees there were. Hard construction costs averaged 74%. Soft costs which included engineering, architectural and permits were 16%. Demolition, off sites were 2%. Construction financing was about 7%. The economic findings, based on actual rents with no operating expenses other than taxes and minimum operating expenses, the return of income on cash flow was negative where you'd demolish existing units and reconstruct new units. The appreciation rate was figured at 3.5% per year. Even with the appreciation rate, there was not sufficient offset for negative cash flow. 4 Planning Commission Minutes October 5, 1992 Development of a second unit apartment would yield both a positive cash flow and a positive return on an investment. That's figured about 8.84%. On an existing single family structure the residences would yield about one basis point less return than a detached second unit. The difference could be made up with preservation incentives. That has not been figured in. The next step is to complete the matrix. Commissioner Alvarez asked Mr. Ryan about the price per lot. How did he arrive at that cost? Mr. Ryan did several things. He contacted people who purchased property as part of their development and he looked at the sales records from different realtors and looked through the assessor's information. He looked at all properties south of Chapman, both the east and west quads. They were the most similar. Commissioner Alvarez wanted more detail on the items that drove up the cost of construction in Old Towne vs. outside of Old Towne. Mr. Ryan said one person had a grading cost of $10,000. That was unusual, but he found out some of the lots on the west side of the street had a drainage problem. In order to develop a second unit on the back, soil must be brought in and then be compacted. That could add $10,000 right there. Some of the 4-unit projects, a lot of the units have the same layout and design and there's only about four or five patterns that can be laid out on an Old Towne lot because of the setbacks and parking requirements. He thought the fees were somewhat less than other cities, but they are a substantial 16% of that total. The break down for the architectural and engineering fees was running between 6 and 10 percent, depending on the amount of review required for the project. Architectural engineering would run about 5%. Wood windows and siding do add to the cost of construction. Commissioner Alvarez questioned the income approach. What were the gross rent multipliers? Mr. Ryan said they looked at the net operating income and used a multiplier for that. You divide it by 0.095 to come up with a market rate. Commissioner Murphy said one of the intents of this analysis was to try and get their arms around the question -- is there a difference financially in a R-4 lot vs. a R-2-6 lot? Based on the analysis, can staff draw a conclusion from that to answer that question? Mr. Ryan said there is a difference in value based on the fact that the costs fora 4-unit and 3-unit are substantially different, but the square footage is approximately the same. The return would be a little bit higher than a 3-unit based on that scenario (be built to the full building footprint). But the adjusted basis of the value of the building is considerably less .than the market value of what it cost to purchase the land, demolish the building, and construct it. That's based on the fact the land itself is too expensive. As far as the return on the investment, it's not sufficient to support that kind of development. That's clear by the fact they looked at a minus 8 or larger, 11% negative internal rate of return. You cannot build or finance something where there is that kind of debt service. You'll either forego the maintenance -- there's one particular property that had a 40 year loan and an interest only due on sale in five years. That's the only way they could service that project. There was too much debt service to support the income on it. From a financial perspective there is not that much of a return from the scenarios staff looked at. With a 5 Planning Commission Minutes October 5, 1992 3-unit, single story, the units are not large enough and the rent for smaller units in Old Towne are 93 cents a square foot. They used $1.16 a square foot to make the numbers work better. Where you do not have demolition in place, you're actually ahead of the game. So you can have a higher level of return on your dollars for a second unit than you would per dollar for 3 or 4 units. Commissioner Bosch asked Mr. Ryan to compare the difference between three small units on a single story vs. three units going to a second story? To get the larger units, 3 units going to a second story which means a higher gross income, but are there off setting costs? Mr. Ryan replied there would be demolition in both cases. The construction costs are a little bit higher in a single story for three units. Your return is a little bit less on a 3-unit because the size of the units don't rent as much as a 2-bedroom/2-bath unit in a large 3- unit project. The return on the investment from a 3-unit approach would be that the larger units would rent at a higher yield and would offset the construction costs fora 2- story large 3-unit project than a single story project per square foot. When he does the internal rates of return for those projects he will know exactly what it will be. Commissioner Bosch's understanding for the proforma for a second unit added to an existing unit and that for two new units or both units rented vs. one rented and one owned would be about the same. Mr. Ryan said there would be a little more yield if you combined the mortgage of an existing single family structure with a new unit. You come out a little bit ahead on that, but it's real close. Commissioner Bosch said in looking at this overall, there appears to be two reasons for increasing the number of units when put on the land with a negative return. One is only if you combine properties so that you can get more density on because the development standards would allow more. Or, if you had a much lower basis for the property when you started. Mr. Ryan responded both would be true. The other part would be the fact that if your basis in the property that you've had for a long time, it may be a lower basis and you have a higher return, might offset that. But relative to the return to the true market value, you're actually having a much lower return on another investment. Chairman Cathcart mentioned that he and Commissioner Murphy separately had met with Dan Slater and he gave him documentation that is public record from the previous Planning Commission meetings with petitions and Minutes of that meeting. They were duplicated and given to the entire Commission. Moved by Commissioner Murphy, seconded by Commissioner Alvarez, to add this information to the public record of this hearing. AYES: Commissioners Alvarez, Bosch, Cathcart, Murphy, Smith NOES: None MOTION CARRIED Commissioner Smith stated although she was not on the Planning Commission at the time of Mr. Clark's first hearing, she was present at the hearing. Subsequent to her appointment, she has familiarized herself with all pertinent information. 6 Planning Commission Minutes October 5, 1992 Commissioner Alvarez stated he was the owner of a 12-unit townhouse complex at 152 North Olive, but after his discussions with legal staff he is outside of the 300 foot mark and sees no benefit either negative or positive. The public hearing was opened. T.J. Clark, 811 East Chapman, does not believe the information received at this meeting can be applied because it could be changed so rapidly during the current recession. The purpose of bringing this up originally was to try and get their zoning back on North Olive Street, which was down zoned. A lot of them did not even know it was going on. They're asking to be re-zoned to R-4. They are a small island as the map indicates and that is spot zoning. Nicholas Ross, 194 South Los Timbres, owns property just west of the area in question 250-252 North Clark). As a real estate broker he appreciates the Old Towne area. He felt the up zoning after it has been down zoned would create a negative impact on the neighborhood. He was born in Orange, but raised in Santa Ana. He has seen what has happened in Santa Ana in areas that were zoned at a higher zoning. It has created a negative impact to values to single family homes. Commissioner Alvarez asked what the house sales and values were in Mr. Ross' particular quadrant? Mr. Ross concurred that both those areas are comparable to each other. The industrial to the west would have some impact, but not a great impact. He hadn't noticed that impact in that area. He sees a greater impact to the single family homes. The parking situation is also an issue. Anke Vogelvang, 288 North Olive, has severe problems with parking. She really doesn't want to have more homes/apartments built next door. She wants to save the neighborhood. Corinne Schreck, 446 North James Street, said there were approximately 750 parcels, houses and apartments in Old Towne that are non-contributing. Seven hundred fifty is approximately 1/3 of the structures in Old Towne. One-third would not quality for the Mills Act, 1/3 would not qualify for historic facade credits, 1/3 would not qualify for historic rehabilitation tax credits -- that's a large amount of structures that have not been spoken about at all in this report. Why is that? Mr. Ryan responded staff assumed from the direction of the Planning Commission that they were asked to look at preservation incentives and other incentives to reduce the burden or impacts for demolition and rebuilding. If there is an existing non-conforming structure (several of those were built in the 1950's and people have added second units on them), in some cases adding a second unit to an existing non-contributing structure will pencil out. Those in fact are single family homes. There's two projects pending and those costs came in around $87 a square foot and was fora 1,000 square foot addition. That was to anon-contributing structure. There is room for development of those particular structures that are non-contributing. He didn't see a problem with them if developed according to the guidelines. Chairman Cathcart asked how many of those 750 units are in the area under discussion? 7 Planning Commission Minutes October 5, 1992 Mr. Ryan believed there was only one non-historic structure in the whole North Olive area. Everything is historic. They don't directly affect the item being discussed this evening. Buildings that have been remodeled are considered no longer contributing as far as the classification still contribute to the streetscape. Commissioner Bosch referred to the first page of the September 29 memorandum regarding the internal rate of return for existing single family said it excludes any preservation credits. (Correct.) You said that the cost side also did not differentiate between the historic costs of adding on to historic vs. non-historic. (Correct.) Mr. Ryan said there's a tax credit based on dollar for dollar credit. You have to have a building which would generate $26,000 credit tax free to get that kind of return on a facade easement. That has to be computed into the return. Mrs. Schreck asked under the Mills Act, if you bought a property and are under Proposition 13, the Mills Act would not be for you? Mr. Ryan responded there would be a savings if you bought property after Prop 13 -- it would be considerable and could be passed on to the new buyer. Pre-prop 13 savings would not be that much. For those properties that don't have the Mills Act, they could use the facade easement. Alice Clark, 205 North Pine Street, asked to have the facade easement explained to her. Someone would have to be willing to take your facade easement (example, Gladys Williams house on North Olive). Who could she sell her easement to? Mr. Ryan said the building was listed in the historic inventory as historically contributing. The Mills contract has been in place; it's 15% of market value as a deed restriction. That went to a preservation organization outside of the City. The person has to solicit an organization to receive that easement. There are probably 20 or 30 in the State that could do that. Mrs. Clark was in favor of preserving nice, beautiful sound things, but she didn't think anyone would consider this sort of facade easement. People should start thinking practical rather than dreaming of what could be. She did not understand the matrix and the figures did not make sense. She asked if Dan Slater came to the Commission with information and can the public get that information? Did the Commission solicit that information from Mr. Slater or did he want the Commission to have it? Chairman Cathcart explained Mr. Slater called him on the phone and said he had public record information and it's available to everyone. It was not solicited by Chairman Cathcart. Commissioner Bosch spoke about the facade easement. One wishing to obtain the credit and whose building is on the historic list, solicits the opportunity to donate to a qualified organization. (Correct.) And that qualified organization has to have some basis like an incorporation, probably not for profit, and has a duty to do certain tasks over a period of time. Mr. Ryan responded yes. The agreement is specifically spelled out as far as the contract. One of the uses of the Mills Act would be the unremforced masonry program. There has been a law passed that requires wood framed structures (1 to 4 units) to 8 Planning Commission Minutes October 5, 1992 have a notice upon sale that there might be deficiencies as far as the building being bolted to the foundation, shear plates, piers, etc. A lot of the homes (pre-1940) had lime in the mortar and those foundations need to be completely replaced. This will offset that cost over a period of 10 years if owners agree to do this work and enter into a contract. The facade would be a direct credit initially. The Mills Act tax credit could offset the cost of the rehabilitation. Commissioner Murphy thought Mrs. Clark's question was directed to him as well and he concurred the same scenario holds true with his telephone conversation and meeting with Mr. Slater. Commissioner Smith stated she received the information from Mr. Slater tonight; however, she was quoted in the information and was there at the hearings. Dan Slater, 278 North Pine, recognized staff had put a lot of time into the analysis and he appreciated it. It's his understanding that if the value of the property as it sits today is worth more than the underlining value of the land as it is currently zoned, then the highest and best use is therefore not R-4. He owns property at 424 North Lemon, one block away from the study area which he bought since the neighborhood was down zoned. He asked two questions. If the zoning is changed to R-4, will that not place the area again in conflict with the General Plan and require a General Plan Amendment? What is the General Plan for the 200 block of Olive, just south of the study area? One staff member told him it was medium density and two have told him it was low-medium. Which is it? If it is low-medium, then it also is in conflict with the General Plan. The 200 block of North Olive was originally in the study, but it was his understanding that a former City official asked that it be removed from consideration. There seems to be an assumption on the part of some also that since the School District property is R-4, it is destined to be developed to such. That fact is the property is in the General Plan as a public facility. In 1990 there were a total of 149 residential lots considered for down zoning in this area. Of these 149 lots, 97 were still single family and 26 were duplex, meaning that over 82% of the neighborhood was still single family or duplex. Of the 19 parcels under consideration, 17 (or over 89%) are conforming under R-2. Even if the zoning reverses back to R-4, one of the two which are now non-conforming, the 5-unit building, will still be non-conforming. The area is actually more consistently single family than the other areas down zoned in 1990. The owner residents immediately adjoining this area also wish to keep it R-2 as indicated by the signatures gathered in the last week. He submitted petitions to the Commission for their review. Mr. Murphy said the density for the multiple family areas is determined by the General Plan. The zoning ordinances of the R-3 and R-4 districts do not have density maximums written into the ordinances. Staff is proposing to modify the terms for the R- 4district and remove that maximum from the title of the zone, making both the R-3 and R-4 zones multiple family residential districts. That would help to eliminate any conflict with the General Plan (6-15 dwelling units per acre). The R-3 and R-4 zones are used interchangeably throughout Old Towne in terms of the low-medium vs. medium density areas. The R-3 is not the low-medium and the R-4 is not the medium density designation. To straighten this out, it will require massive zone changes or General Plan Amendments for the Old Towne area. The R-3 R-C-D zone would, in staff's opinion, be a more appropriate zone for the low-medium density General Plan area, but the R-4 could probably still be applied to the low-medium density. 9 Planning Commission Minutes October 5, 1992 Mr. Slater said there was a conflict coming from the staff. If it's actually zoned medium, that's the whole reason why the area north of Palm was considered a problem or conflict with the General Plan in the first place. Mr. Slater read the top of the petition for the record. "We the undersigned own homes in the 300 block of North Lemon and the 200 block of North Olive and reside there as well. We oppose changing the zoning of the 19 parcels on Lemon, Olive and Palm to R-4. We would be the residents most immediately impacted by this proposal and wish to discourage more apartments in our neighborhood -- not encourage them. We feel the same about any future proposals to build apartments on the school district property." Additionally, Mrs. Schwarz at 141 East Palm signed the petition and definitely does not want more apartments in her neighborhood. An issue raised in the General Plan and Historic Preservation Element is that there is a disparity between the base zoning and the existing use in most of the Old Towne environs. In 1990 the Planning Commission and City Council took a big step in resolving the conflict between the way the land is currently being used and zoning in this neighborhood. If Mr. Clark has 3 legal units, he deserves to have some protection so in the event they are destroyed he can rebuild within one year. But in order to preserve the cohesiveness and value that is Old Towne, zoning should be as close as possible to what the actual use is. R-2 is reasonable and practical; let's keep it that way. Commissioner Alvarez asked with Mr. Slater's knowledge of the neighborhood, what are the house values? Do you concur with the $205,000? Mr. Slater said it really varies in that neighborhood. He said there was a pretty good comparison between this quadrant and the southwest quadrant. A house just sold at 311 North Lemon, the property is an undersized lot and it sold for $143,000. That's the lowest priced home that has sold in that neighborhood. A single family home vs. units is like apples and oranges and lenders look at them accordingly. Bank of America says you must put 80% loan to value with 20% down for two houses on a lot. If you owner- occupy units lenders will let you get a higher loan to value on them. If you're buying as an owner-investor more money down will be required. Units are based on the income stream they produce. When appraisers appraise units, they want comparable apartment units because they want to do a rent comparison. It's the income that's more important than anything. The gross rent multiplier for Old Towne depends on the condition of the units. The market for income units is so depressed right now. If it's really nice, maybe it could get 12%; bread and butter units, it's down to 8%. Angie Lopez, 362 North Lemon Street, said a traffic problem exists now and she does not want new apartments. There's too much density and there will be more crime. Beatrice Vega, 486 North Olive Street, does not want up zoning on Olive Street. Whatever happens in the 200 block will affect them in the 400 block. She wishes to remain R-2. Ralph Zehner, 630 East Culver, said there are currently 27 homes under the Mills Act in the whole State. Under the original down zoning, the property owners were never notified. In the last study session staff indicated the number of units would be dictated by the number of parking spaces. Give the people back their zoning. Duncan Clark, 205 North Pine, thought the down zoning issue has gone far enough. Many of the residents have owned property that was once R-3 and R-4; and some still own a little bit. They don't intend to develop it right now, especially with the low market rents. He recognizes that any down zoning will take quite a bit of value from the people 10 Planning Commission Minutes October 5, 1992 who own those properties. Those people were not given a fair shake at the time those hearings took place. It was improperly advertised as the Cypress Street area. It would behoove the City to recognize there is no impaction in this Old Towne as far as these 19 parcels are attempting to get re-zoned. T.J. Clark, 811 East Chapman, asked if the neighbors are aware that the Orange Unified School District property is still zoned R-4? What happens to that when the building is torn down? Are the neighbors aware the Anaconda buildings are to be torn down and multiple units are to be built? Mr. Murphy reaffirmed that the O.U.S.D. headquarters is still master planned public facilities even though it is zoned R-4. Any change to that use on the property will require a General Plan Amendment and public hearings in order to make that change. And perhaps the zoning will have to be changed as well. If it is to be changed from its present quasi public use, that will require a change to the General Plan if it's to be used for residential, commercial or private use. The Specific Plan for the railroad depot area is being completed and will go to public hearing some time towards the end of November. As part of that Specific Plan, there is a proposal as the City Council has already adopted in concept to develop apartments on the north half of that area which is the lower section on the map. There will be a proposal for multiple family units on the properties between Maple and Palm within that study area. Ms. Vega was on the school district committee. She's going to fight tooth and nail to see that it is advantageous to their neighborhood. Mrs. Clark first heard about the Anaconda project from Mr. Ryan when they were at lunch and that's when T.J. Clark first learned about it because she told him. Carole Walters, 534 North Shaffer, said there was a chance Chapman College might get the school district property, but she was told if a bigger buyer comes along, they're going to sell the property. The public hearing was closed. Chairman Cathcath personally assumed that the public hearing process was appropriate at the time of the down zoning, that due process was in order and did take place. It's unfortunate that some people feel they didn't get the opportunity to speak. He thanked staff for their job. It would be nice if an answer would become clear as a bell; it would make the process much easier, but it doesn't. The one thing he was concerned about is that even though the properties are not cash flow relevant if you were to go to 3 units the way they are now and they were zoned R-4. What concerns him is consolidation in Old Towne. He's not concerned that the people who own the property now are going to turn into monsters. Everyone has turned against one another because of elements out of their control. Commissioner Bosch said the process was complicated a bit by additional information. There are still some people who have not spoken one way or the other and they're not on anyone's petition -- 327 N. Olive, the duplex at 133 - 137 West Palm, plus three new lots through the collection of petitions -- 141 Palm, 337 and 345 North Lemon, who don't want the zoning back (the density is a different story altogether). And there are three undersized lots at the Northeast corner of Lemon and Palm. Unless they are consolidated, it was his understanding they're not likely to get another unit on there. 11 Planning Commission Minutes October 5, 1992 There is one spot left on Palm where there is a person concerned that they would like the higher density back. He agrees with the Chairman regarding the school district property. There is no guarantee of what will go on there other than that there must be a change and a full public process before anything changes and it's got to be something that radically improves the community rather than destroy it. Regarding the Anaconda property, there have been several years of conceptual plans brought before various committees and City Council. There has been a great deal of input from a long time ago. If there is increased density there that would be mitigated in terms of physcial impact upon adjacent residences and that there is adequate parking. There is the concern from everyone that the current multiple family standards have a problem with regard to parking. Technically it does control of what can be put on the lots and it's obviously controlling the problems in all the neighborhoods and it's probably a bigger impact on difference in property values than any calculation. He also had a concern with a precedence being set. The numbers do not show a good investment return and he wouldn't buy one of these lots no matter what the decision will be if he thought of it as an investment. There is only one lot on the Lemon side of the 19 parcels where the lot isn't substandard in size nor has been represented in not wanting the density back. Those relate most closely to the R-2-6 across Lemon. Most of the frontage on Palm that either does not want to return or is substandard. There are neighbors who have a right to be confused. What we have is application zoning, lot by lot by lot. It's an interesting problem. He has to respect the rights of single family property owners too. There are a bunch of them in this area. As has been heard at many of the study sessions, there is a huge negative impact on the single family homes and poorly designed (not well designed) multiple units occur along them. He's concerned where they allow multiple family with poor development standards in place it will define ones that could damage those people from an investment standpoint. Commissioner Smith found it unfortunate to make this decision. For the Commission, it is merely a recommendation to the City Council. There are a lot of mistakes from the past that have occurred in Old Towne, which everyone is endeavoring to correct now. Those people asking for a zone change have properties with a value that exceeds traditional real estate value. It's not something that is easily declared or figured on paper. In the past real estate value in this area has always had no sensitivity to the historic value of the neighborhood. No one needs to be realtors to look around to see the inconsistency of development in this neighborhood. As you know, from her work in the community, in this case is if you would have it less, it is more. She doesn't see the value of taking lovely sheltered little streets in almost perfect condition and mandating it for multi-family use. She was in favor of zoning where both owners can get a good return and the neighborhood can maintain a quality of life. In this case everyone wins. She doesn't think any of them could have foretold 20 years ago the value this One Mile Quadrant would take on in real money in real estate value. It is as much a surprise to each property owner as to the next, except for those people who have bought in recent years who saw that something was happening in Old Towne. One of the things that has been happening in Old Towne has been preservation. The particular group that several people cited may have caused tremendous expense to the City, but they also brought about tremendous value to certain property owners, land owners and landlords in the area. She does not agree that any down zoning will take away value. That depends on what neighborhood one lives in. Not across the board does down zoning take away value. In some areas, it increases value because it insures the integrity of the property. She cautioned that they do not get caught up in the school district property as a pawn between the City and the school district. Most of the people know the City and school district are not always the best of friends. One of the 12 Planning Commission Minutes October 5, 1992 pawns in the process is this particular large group of property. She was more acquainted with the Chapman College Specific Plan and the school district insisted it hold the R-4 zoning. The argument that this is an island in the middle of R-4 zoning is a blessing to the property. She would hate to see R-4 including the school district property, this neighborhood, South Olive and the Anaconda -- that is far more impact than Old Towne can enjoy and support in infrastructure, parking, density, people, crime, noise or anything else. She was a participant to the entire first set of public hearings. It took well over six months. She refers to it as the ruined summer of 1990 because they spent many, many hours looking at the process. She sympathizes with the people of this block who did not know about the hearings. She is sensitive to the fact that your leader was very ill that summer and she did not have insight into the problem because of poor health. She would venture to say if it were not for her aftermath of bringing this to your attention, that you still would not have noticed for a little bit longer. In this community we have watch dogs that protect the interest of the people and the economic viability of the neighborhood. She was not here to make friends; this is a difficult position to be in at this particular Commission level. Her decision depending on the motion will always be for what she feels is for the benefit of the entire community, not particular individuals. Commissioner Alvarez clarified his position. He was the one who was adamant about a month ago to not wait for the AI Gobar report. The reason for that was because he has a history of building multiple units in Old Towne, ones they are very proud of. The numbers Dan Ryan speaks of is pretty close and he commended Mr. Ryan for that. He knew that going in. On the other hand, with that experience and having done two 4- plexes within the last year, looking now at the information that was given to them at the final workshop, he thought anyone could take that information (it's a dream for any developer to have that done by a city) and see that this block really isn't a 4-plex project. Another problem is the Design Guidelines. The one stickler is the parking. Having done two projects in Fullerton last year, their Design Guidelines are much stricter than the City of Orange's. It's going to be a problem they will encounter each time unless it is changed. It will have a large impact due to the Design Guidelines. Regarding the work shops, one of the conclusions he drew from the work Jere Murphy had done was that this isn't a 4-plex lot for two reasons. One of them is the depth of the lots (it's simply too short); the other reason is that they're too expensive. Fora 4-plex lot he asked what it would cost to buy a house on this street at a break even level. Mr. Ryan told him it would have to be somewhere in the $180,000 range or lower. Having built a 4-plex again within a year and financed it permanently, it was $140,000 and it barely breaks even now given today's conditions. Looking at the lots here, he didn't think he could get a lot for $140,000 or less. Due to those two conditions and the Design Guidelines, what he would like to see come out of this, is a zoning that somebody who buys in here knows what they're getting upfront. There should be no hidden agenda. Looking at the income streams, the income doesn't support it. In looking over the rental surveys, they're quite generous to say the least. The lenders will not finance these projects unless you're a long time owner. The condition of the neighborhood needs a lot of help. There's no way to up zone the neighborhood and be sure you can clean up the neighborhood. The City isn't offering any benefits to the owners now to clean up the area. When you change a zone, it should be for the benefit to the neighborhood. It should cause the neighborhood to go through a transformation. In speaking to the person who owns Anaconda, he verified Commissioner's Alvarez' feelings that if we increased the housing density, really what are we doing to the surrounding neighborhood. He's done a 360 on this issue. He's gone from pro up zoning to now looking at the entire cost and he simply can't see how it would work. 13 Planning Commission Minutes October 5, 1992 Commissioner Murphy thought the one thing left out of the equation and it's something that still bothers him is the financial analysis is based on buying in today. He thought Commissioner Bosch referenced the fact that there are a whole lot of folks involved here who have owned their properties either in the family or purchased it at such a time where the cash flows pencil out dramatically different. He thought Mr. Ryan concurred on this during the discussions as far as a couple of points can tilt the analysis dramatically different. He too struggles with the quality of the neighborhood issues from a standpoint of how much can you truly expect to put on these lots based on size, based on location, traffic circulation, etc., and the impacts on the neighborhoods. In the past, he has stated his concern of where this thing came from and misunderstandings on the initial set of hearings. Taking those assumptions into account, he's still wrestling with this particular one on the basis of what's been presented at this hearing. Commissioner Bosch thought he understood that even with the addition of just a second unit and keeping the house in ownership, that's probably the best rate of return on the property. What realistic value, if any, is there of Mills Act, facade easements, and all that kind of stuff? It doesn't matter because they only protect the single family residence. It doesn't help the other people. It doesn't make a bad rate of return better for too much cost of construction. What it does help is the people who don't do it improve their lifestyle on the property. Regarding the traffic issue and 3 units per lot (some 35 units on that small street), some trade offs would need to be built in to offset that to be sure a dangerous life safety situation is not created. Commissioner Alvarez said one other issue needs to be addressed and that's the notification. He would like to see the Planning Commission work with staff to arrive at a new way of notifying the public. He suggested reviewing the procedure in order for everyone to benefit. Chairman Cathcart concurred. He said they were always looking for a better way to advertise, notify people and to fill up the room. Commissioner Smith reminded everyone the original down zoning was initiated by the City; it was not initiated by individuals or any group. It was regarding the development of the Santa Fe Depot area which is suppose to be something that will benefit everyone economically in an under utilized area. The Specific Plan is still in process and it will be another couple of years before that is finished. At any expense to the City that it takes for notification to all the people, she believes in full public disclosure to all people who lives in the City. That is one of the things worth paying for. Commissioner Bosch stated as a participant in the first action relative to this property and adjacent area referred to as the Cypress Street area he was in support of the changed zoning to R-2-6 that is currently on the property. Those reasons centered about the over population that was taking place in other areas of similar lot sizes and even larger under current zoning standards, development standards and zoning ordinance that were causing a great negative impact on the living environment, not only for single family homes but on the property values for many of the multiple family units. They looked at the strength of the single family home ownership within the area, not only the strength but the growth in that over a period of time. They looked at the significant traffic impacts that were occurring, the revitalization efforts and also the property values and returns, but nothing like the level of effort put into this area. There are sub-standard properties whether because they were developed to asub-standard nature originally or they are small lots. He could not, based on his own decision making process and the 14 Planning Commission Minutes October 5, 1992 information made available to him, believe other than that people have many misconceptions about what they can do on their property, either ph sically or economically, based upon numbers and letters and based upon what a few people have done whether or not it was within the constraints of proper planning, zoning ordinances or permit procedures. It doesn't work and it must stay at the R-2-6 because economically it makes sense. Moved by Commissioner Bosch, seconded by Commissioner Smith, to recommend to the City Council to deny Zone Change 1151-92, petition to change the zoning back to R-4. AYES: Commissioners Alvarez, Bosch, Cathcart, Murphy, Smith NOES:' None MOTION CARRIED Chairman Cathcart excused himself from the meeting due to illness. IN RE: NEW HEARING CONDITIONAL USE PERMIT 1975-92 -LILY KHAJENDURI A request to allow live entertainment and dancing in an existing restaurant located in the C-TR zone. Subject property is located at 1722 North Tustin Street. NOTE: This item is categorically exempt from the provisions of the California Environmental Quality Act (CEQA) per CEQA Guidelines Section 15301. Mr. Godlewski updated the Commission. On July 6, 1992 the Commission approved the conditional use permit to allow live entertainment and dancing at an existing restaurant. The Commission's approval requested that staff bring back a report in 90 days and that report was submitted to the Commission for consideration. With the application for live entertainment and dancing, two or three of the neighbors spoke at the last hearing, basically complaining about the previous tenant and previous operation at that location. The 90 days was to give time to review the operation to see if any problems persisted. Staff checked with the Police Department and Code Enforcement and no complaints had been lodged during the last 90 days. Staff also contacted the individuals that spoke at the previous hearing and they also had no complaints about the new business. Mr. Herrick said one of the items mentioned in the staff report as not having been complied with was the submission of the indemnity agreement that was required. Mr. Ross, the applicant's attorney, has submitted that to Mr. Herrick's office. He reviewed the language; the substance of it is fine, but there are a couple of format issues that Mr. Ross will take care of within one week. Mr. Herrick sees no reason to consider that item as still being open. He felt it has been adequately resolved and when the new document comes in, it will be properly recorded. The public hearing was opened. 15 Planning Commission Minutes A lican October 5, 1992 Barry Ross, Attorney, One Newport Place #900, Newport Beach, represented the applicant and summarized his client's position. His client has complied with all the conditions, but one of the conditions limits the hours of operation (Item 1). "Live entertainment shall not extend beyond the hours of midnight on Friday and Saturday nights, and 11:00 p.m. on Sunday and week nights. They requested those times be extended so that on weekends the hours could go to 2:00 a.m. (Friday, Saturday and Sunday) and then on week days go to 1:00 a.m. Persian food is served along with Persian music and dancing. They could benefit from the extended hours past midnight on weekends. During the past 90 days the neighbors are happy with his client's operation. There have been no problems with the Police or City. They could operate a little bit better with the extended hours. The public hearing was closed. Commissioner Bosch asked if it were appropriate to consider a revision to the conditional use permit without proper notification? Mr. Herrick would say no. There is a procedure for modification of a conditional use permit. This request has not been notified to the public. Mr. Godlewski said the Commission's request at the original hearing was that staff duly notify a public hearing within 90 days: Staff did a full notification that this was going to be a review of the conditional use permit as approved. He thought if during the review the Commission had a problem with some condition, conditions could be added or impose more conditions. Similarly the Commission could change conditions one way or the other. In that light and because it was noticed as a public hearing, that option is available. Mr. Herrick concurred with that explanation. Commissioner Smith wondered if the lack of complaints from the neighbors wasn't because of the hours being what they are? That was some of the bad reports last time. People were awakened during the middle of the night by the cleaning crew and cars leaving. Mr. Godlewski said staff made individual contact with those people who spoke at the last hearing and there was a positive response. Commissioner Alvarez said there were some items that weren't brought to staff's attention. What were those? Mr. Godlewski said there were two items and Mr. Herrick had better knowledge of them. Mr. Herrick said one was the indemnification agreement; the other was the insurance. The two are related. He hasn't seen the insurance certificate, but understands it has been submitted. The indemnification agreement has been reviewed and it needs to be re-formatted because it needs to be recorded to run with the land. Mr. Ross assured him there was no problem with that and will be done within a week. He was satisfied with those items for the purpose of this review. 16 Planning Commission Minutes October 5, 1992 Commissioner Murphy wanted clarification on the action to be taken. Mr. Herrick said if the Commission were to leave the conditional use permit as it was approved, there could be a motion that it was reviewed. If there was a change to the conditions, that would require a motion and a majority vote. The other alternative would be to establish a date for further review if the Commission felt it were necessary. That would also require a motion. Commissioner Alvarez would be most comfortable in making a motion to approve the review as it stands. Moved by Commissioner Alvarez, seconded by Commissioner Bosch, to approve the review of Conditional Use Permit 1975-92 as they are operating within conformance of the conditions. AYES: Commissioners Alvarez, Bosch, Murphy, Smith NOES: None ABSENT: Commissioner Cathcart MOTION CARRIED Moved by Commissioner Alvarez, seconded by Commissioner Smith, to amend condition 1 of Conditional Use Permit 1975-92, to allow the petitioner to increase the hours to 2:00 a.m. on Friday, Saturday and Sunday (including live music) and 1:00 a.m. on week nights, and to bring this item back to the Commission in 90 days for review, and that it be re-advertised as a public hearing. AYES: Commissioners Alvarez, Bosch, Murphy, Smith NOES: None ABSENT: Commissioner Cathcart MOTION CARRIED Mr. Godlewski said it would be easier for the City to bear the cost of re-advertising. IN RE: MISCELLANEOUS Public Works project to underground existing overhead Edison, telephone, and cable t.v. wires on LaVeta between Parker and Cambridge. Mr. Johnson said this was an informational item to make the Commission aware of the underground utilities project No. 13 staff is proposing on LaVeta between Parker and Cambridge. This item will utilize monies that the Edison Company puts aside as part of Rule 20 A. The City, in order to implement this, must hold hearings and pass a resolution. Commissioner Bosch applauds the City on using every opportunity to apply Rule 20 A funds to improve the City's environment. IN RE: OTHER ITEMS Commissioner Alvarez sits on the Government Committee for the Orange Chamber of Commerce. They are concerned with the process of businesses going through the Design Review Board, Environmental Review Board and coming before the Planning Commission. He suggested holding a study session with the Planning Commission and Design Review Board as a group, and again with the Planning Commission and the 17 Planning Commission Minutes October 5, 1992 E.R.B. as a group in finding ways to make the process a little more user friendly. The Chamber also feels there may be some avenues that through reviewing how the decision making process is made from the D.R.B. to the E.R.B. to the Commission level, to tighten up the process and make it more user friendly. He looked to his fellow Commissioners for guidance. Commissioner Bosch said something should be done to coordinate those activities. It's very prudent to bring this up again. Commissioner Alvarez thought the timing was very good because there are two new Commissioners. He also understands D.R.B. is replacing someone. Commissioner Murphy responded it was an opportunity for the business community at large to become more aware and have some increased sensitivity to what the process is and more knowledge in that area is certainly going to be beneficial to an applicant as they work through the process. He looked to staff to come back to the Commission with a recommendation on a methodology to approach this. Mr. Godlewski preferred to come back to the Commission at a future study session between staff and the Planning Commission in order to bring the Commission up to date as to what they have done and what their philosophy and direction is on those particular issues, and how staff is going about addressing them. Then, get direction from the Commission of how you want staff to proceed with study sessions between the Commission and E.R.B./D.R.B. It was suggested previously that there would be a meeting between City Council, Planning Commission and D.R.B. He encourages more meetings with D.R.B. and Planning Commission; maybe even City Council. An appropriate study session date will be determined at the next meeting. Commissioner Alvarez will be out of state from October 20 through 27, 1992. Commissioner Murphy stated the rest of the economic analysis that was prepared for the additional districts in the zoning studies will be available for the Commission on the 19th. It was his understanding it would be presented as a miscellaneous item on that agenda. Mr. Godlewski can have the information available and give a short discussion of what it is and hand it out on the 19th as a miscellaneous item. At that time a date can be set for public action or make a recommendation to City Council. IN RE: ADJOURNMENT Moved by Commissioner Smith, seconded by Commissioner Bosch, to adjourn at 10:00 p.m. AYES: Commissioners Alvarez, Bosch, Murphy, Smith NOES: None ABSENT: Commissioner Cathcart MOTION CARRIED sld 18