Title
Resolution to Adopt a Fee-in-Lieu Rate for the Sustainability Option for a Height Increase Under Section 5.18 of the Unified Development Code
Memorandum
City Council is considering ORD-26-18, which would amend Sections 5.18 and 5.37 of Chapter 55 (Unified Development Code) of the City Code to update the eligibility requirements for developments to receive an exception to the normal zoning district height limit for implementing sustainability measures. Among the proposed amendments is the addition of an option for developers to contribute a fee-in-lieu for partial fulfillment of the requirement for on-site solar energy generation. This approach is modeled after the height bonus fee-in-lieu option for affordable housing (though unlike that option, the sustainability option only permits a portion of the requirement to be achieved by an in-lieu contribution).
Under this amendment, “Provided that the development includes on-site solar collectors with a total surface area equal to at least 20% of the footprint area of all buildings, the remainder of the required solar collector surface area may be achieved by a fee-in-lieu contributed to a designated City fund for creating equivalent solar collector surface area within the City in the rate or amount established by City Council.”
This resolution establishes the formula for calculating the fee-in-lieu, as well as the resulting rate.
Establishing the amount of the fee-in-lieu
Under the updated sustainability option, the City must create a methodology to determine how much solar collector surface area must be installed at a development to meet the 60% building footprint area requirement. And, based on that calculation, the City must also create a fee-in-lieu formula, which must be adopted by City Council.
To arrive at a reasonable contribution amount, the City conducted research into existing use cases and robust datasets. Based on the analysis, the City is recommending the following:
Required Solar Component (sq. ft.) = Building footprint area (sq. ft.) X 0.6
Where:
• Building footprint area is determined by the building/site developer and is the square footage of the first floor of all buildings in the development; and
• 0.6 represents 60%
A developer may achieve the Required Solar Component through a combination of onsite solar installation and payment of a fee-in-lieu. Under this option, the developer is required to install solar to cover at least 20% of the building footprint area onsite, and the remaining Required Solar Component may be achieved by a fee-in-lieu contribution in an amount according to the following formula:
Sustainability Option Fee-in-lieu Amount = [Required Solar Collector Surface Area (sq. ft.) - Actual amount of solar surface area installed on site (sq. ft.)] X Average cost of residential solar ($/watt) X Solar efficiency (watts/sq. ft.)
Where:
• Required Solar Collector Surface Area = 60% of the building footprint area of all buildings in the development in square feet;
• The actual amount of solar surface area installed on site must equal at least 20% of the building footprint area;
• The average cost of residential solar represents the average cost per watt of installing residential solar in Michigan based on staff research; and
• Solar efficiency represents the amount of solar energy likely to be generated in watts per square foot of solar installed based on staff research;
City staff have determined that $2.98 per watt represents the current average cost of residential solar and that 20 watts per square foot represents the current value of solar efficiency, resulting in a fee-in-lieu rate of $59.60 per square foot
As an illustration, if a development has a building footprint area of 20,000 square feet, the Required Solar Collector Surface Area is 12,000 square feet of solar PV (60% of building footprint area). To obtain the height bonus, the developer must install at least 4,000 square feet of solar collector surface area (20% of building footprint area) and may offset the remaining 8,000 square feet by contributing a fee-in-lieu. In that case, the fee-in-lieu amount would be $476,800:
8,000 square feet X $59.60 = $476,800
This fee-in-lieu formula has been reviewed by the Office of Sustainability and Innovations, Economic Development, the Ann Arbor Sustainable Energy Utility, the City Attorney’s Office, and Planning and Development Services.
Staff
Prepared by: Shoshannah Lenski, Sustainable Energy Utility Executive Director
Reviewed by: Missy Stults, PhD, Sustainability and Innovations Director
Valerie Jackson, Assistant City Attorney
Approved by: Milton Dohoney Jr., City Administration
Body
Whereas, City Council has continually reaffirmed a commitment to sustainable and affordable development in Ann Arbor;
Whereas, When a development seeks an increase in height limits under Section 5.18.4.B of Chapter 55 (Unified Development Code), there is an opportunity to receive that increase if the development complies with certain sustainability conditions or affordable housing conditions;
Whereas, The sustainability conditions have been revised to provide flexibility via a fee-in-lieu option for a portion of the required solar collector installation;
Whereas, The Office of Sustainability and Innovations and the Ann Arbor Sustainable Energy Utility have partnered on an internal process to recommend a formula for the fee-in-lieu amount;
Whereas, City staff have developed the following formula for the fee-in-lieu portion of the sustainability option for a zoning height exception:
Sustainability Option Fee-in-lieu Amount = [Required Solar Collector Surface Area (sq. ft.) - Actual amount of solar surface area installed on site (sq. ft.)] X Average cost of residential solar ($/watt) X Solar efficiency (watts/sq. ft.)
Where:
• Required Solar Collector Surface Area = 60% of the building footprint area of all buildings in the development in square feet;
• The actual amount of solar surface area installed on site must equal at least 20% of the building footprint area;
• The average cost of residential solar represents the average cost per watt of installing residential solar in Michigan based on staff research; and
• Solar efficiency represents the amount of solar energy likely to be generated in watts per square foot of solar installed based on staff research;
Whereas, City staff have determined that $2.98 per watt represents the current average cost of residential solar; and
Whereas, City staff have determined that 20 watts per square foot represents the current value of solar efficiency;
RESOLVED, That City Council adopts the resulting rate of $59.60 per square foot for the fee-in-lieu permitted under Section 5.18.4.B.1.b.ii. of Chapter 55 of City Code; and
RESOLVED, That the City Administrator is directed to establish a process to collect, track, and expend fee-in-lieu contributions for solar collector surface area as required under Section 5.18.4.B.1.b.ii. of Chapter 55 of City Code;
RESOLVED, That the City Administrator is authorized to take all appropriate actions to implement this resolution; and
RESOLVED, That this resolution will take effect on the effective date of ORD 26-18 should such ordinance pass.