City requirement for payment of art fees

By John Paul Hanna © all rights reserved

On 11/12/13, the City of Palo Alto adopted a new ordinance requiring public art in private development projects. The ordinance requires new developments to construct on-site public art valued at 1% of the first $100,000,000 of construction costs. In lieu of installation of on-site public art, the developer may pay an in-lieu fee in the same amount as the cost of the public art requirements. The ordinance applies to new commercial development, including new construction, remodels, additions and reconstruction that has a floor area of 10,000 sq. ft. or more and a construction value of $200,000 or more, exclusive of costs for architecture, design, engineering, and required studies; it also applies to new residential projects of 5 or more units, and applies to mixed-use projects. In mixed-use projects, those portions of the projects excluded from application shall be subtracted from the project for purposes of determination of the applicability (square footage or construction value), and for computing the amount of the fee, or the cost of the art. Affordable housing developments are exempt, but that means a project where 100% of the units are affordable, and does not apply to residential projects where the City requires a certain percentage of the units to be affordable. Some examples of application would be:

A mixed-use project with more than 5 residential units and more than 10,000 sq. ft. of commercial space would be subject to the requirement. A mixed-use project with fewer than 5 residential units and less than 10,000 sq. ft. of commercial space would not be subject to the requirements. A mixed-use project with 5 or more residential units, but less than 10,000 sq. ft. of commercial space, would be subject to the requirements.

A mixed-use project with fewer than 5 residential units, but more than 10,000 sq. ft. of commercial space would be subject to the requirements.

In the last two examples, the portion of the project to be excluded from consideration (fewer than 5 residential units, or less than 10,000 sq. ft. of commercial space) would be subtracted for purposes of determining the construction cost. There are detailed limitations on the type of expenditures that qualify and what expenditures are ineligible.

The developer must consult with the Public Art Program Staff within 60 days of the initial application for a permit or other discretionary approval. The consultation must be complete before the development project is calendared for consideration by a public body, including the ARB, Planning and Transportation Commission, or City Council, and before the Director of Planning and Community Environment issues any approvals with respect to the project. If the developer elects to provide art, rather than pay the in-lieu fee, the developer's public art plan must be presented to the Public Art Commission. The developer shall not enter into any contracts or make any expenditures until the Public Art Commission approves the on-site plan. The Public Art Commission is to render a decision within 60 days of submission of a complete proposal. No building permit may be issued until the Public Art Commission issues its approval.

The property owner shall record a Declaration of Covenants, Conditions and Restrictions against the property in favor of the City on a form approved by the City Attorney.

Before a Certificate of Occupancy is issued for the development project, the City shall inspect and confirm that either the public art has been installed as required, or the in-lieu contributions have been paid in full.

The ordinance is recommended (and, presumably, adopted) based on a review of what other cities have done and are doing, and in recognition of the national trend of including private developments in public art ordinances. The broader purposes are to enrich the built environment for residents and visitors, spawn art objects that can enhance a development project or corporation's image and stimulate cultural tourism and economic development.

The overall intent of the ordinance, and the objectives sought to be achieved, may be commendable. However, as in the case of any imposition of a new fee or a new condition of development, there are legal issues. The legal basis for the imposition of a fee by the City on a new development is that the fee is for the purpose of defraying all or a portion of the cost of public facilities related to the development project. The City is required to show that there is a reasonable relationship between the fee's use and the development project. In other words, while the newly adopted policy of the City to stimulate and foster the citywide development of public art, including public art in private developments, may be commendable that does not legally justify the imposition of a public art fee, or a condition of development of public art on a private project. To put it another way, the construction of a commercial, residential or mixed-use project does not in and of itself create a need for public art. Developers who do not want to pay the 1% in-lieu fee, or pay for the installation of public art, will need to file a written protest challenging the imposition of the fee, or the public art requirement by complying with the protest procedures provided for in California Government Code Section 66020(a). The protest must be filed at the time of approval, or conditional approval of the development, or within 90 days after the imposition of the fee or public art requirement. A developer who files a protest may file an action to set aside the imposition of the fee, or the public art requirement within 180 days. The 180 days begins running on the date that the City provides the developer with a written notice, which includes a statement of the amount of the fee or description of the public art requirement, and notification that the 90 day approval period within which the applicant may protest, has begun. If the City fails to provide such a notice, the action must be filed within 4 years from the date the fee was imposed.

For further information, feel free to contact any of the following:

John Hanna (jhanna@hanvan.com), David Van Atta (dvanatta@hanvan.com); William R. Garrett (bgarrett@hanvan.com); or call (650) 321-5700.