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Home My WebLink About17. Provide direction on capacity fees for patio dining Page 1 of 17 Item 17. CENTRAL SAN BOARD OF DIRECTORS ' POSITION PAPER MEETING DATE: MAY 3, 2018 SUBJECT: PROVIDE DIRECTION ON CAPACITY FEES FOR PATIO DINING SUBMITTED BY: INITIATING DEPARTMENT: DANEA GEMMELL, PLANNING AND ENGINEERING AND TECHNICAL SERVICES- DEVELOPMENT SERVICES DIVISION PDS-RATES AND FEES MANAGER REVIEWED BY: JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES ROGER S. BAILEY, GENERAL MANAGER Roger S. Bailey General Manager ISSUE Staff is requesting direction from the Board of Directors regarding the criteria for collection of Capacity Fees from restaurants and other food-service establishments. BACKGROUND On November 17, 2016, the Board of Directors received a presentation titled, "Assessment of Patio Dining" which had been prepared as part of a mentorship project. The project looked at trends in patio dining, capacity fees for patio dining, and included a review of 31 restaurants on Locust Street in Walnut Creek. This initial review indicated that a high percentage of restaurants may have unpaid capacity fees for patio dining. Following this initial review, staff conducted additional research on the subject including performing a more detailed review of capacity fee payments, researching and reviewing historic entitlements, and conducting a detailed review of a broader selection of food service establishments. Square footages for both patios May 3, 2018 Regular Board Meeting Agenda Packet- Page 154 of 225 Page 2 of 17 and restaurants on a randomly selected set of parcels were reviewed. I n addition, staff reviewed and discussed practices for collection of capacity fees for patio dining with Black& Veatch as part of their review of Central San's Capacity Fee program. Since the basis for the collection of capacity fees for patio dining is an increased wastewater burden on Central San's facilities, the review efforts looked at the connection between patio dining and wastewater burden for different types of food service establishments such as sit-down (seated) restaurants, fast casual, fast food take-out, bar, delicatessens, and coffee shops. The causality of added sewer burden for fast food take-out, coffee shops and delicatessens is tenuous as patio areas for these types of food service establishments is often for customer convenience and does not necessarily contribute to the added burden. Based on these review efforts, staff is recommending that the criteria for collecting capacity fees for patio dining be limited to seated restaurants and bars. In addition, staff recommends that an allowance for up to 360 square feet of patio dining area be included for seated restaurants and bars, thus limiting capacity fees for patio dining to that portion of the patio area greater than 360 square feet. This figure is based on a review of 60 seated restaurants within Central San which showed that the median patio size was 378 square feet and the average patio size was 355 square feet. ALTERNATIVES/CONSIDERATIONS The Board of Directors could direct staff to: 1. Continue to assess all food-service establishments for patio dining as prescribed in the current Capacity Fee schedule; or 2. Revise the definition to assess patio dining capacity fees only to Seated Restaurants (RS) and Bars (RN); the following would be exempt: Restaurants Take-out(RT), Bakeries (RB), Banquet Facilities (RC), Coffee Shops and Delicatessens (RD), Ice Cream Parlors (RI), and Yogurt Shops (RY); or 3. Revise the definition to assess patio dining as described in Option 2 with a 360-square foot patio dining area allowance, which would only apply to Seated Restaurants (RS) and Bars (RN); or 4. Provide some other direction to staff. FINANCIAL IMPACTS Based on the typical amount charged for patio dining capacity fees, staff believes there will be a minimal reduction in capacity fee revenue for food service establishments other than seated restaurants and bars as well as a slight reduction in capacity fee revenue for the proposed 360-square foot patio allowance. COMMITTEE RECOMMENDATION This matter was reviewed at the April 24, 2018 Finance Committee meeting. The committee concurred with staff's recommendation to limit the collection of Capacity Fees to seated restaurants and bars and to include an allowance of 360 square feet of patio area. RECOMMENDED BOARD ACTION Revise the definition to assess patio dining as described in Option 2 with a 360-square foot patio dining area allowance, which would only apply to Seated Restaurants (RS) and Bars (RN). Strategic Plan Tie-In May 3, 2018 Regular Board Meeting Agenda Packet- Page 155 of 225 Page 3 of 17 GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility Strategy 2- Manage Costs ATTACHMENTS: 1. Patio Dining Presentation May 3, 2018 Regular Board Meeting Agenda Packet- Page 156 of 225 r r � PATIO DINING CAPACITY FEES MAY 33 2018 Danea Gemmell, PE ;7—: Planning and Development Services Division Manager May 3, 20 8 �. Meeting - CAPACITY r� PURPOSE The Capacity Fee Program equalizes the investment in Central San's assets among current and new users , thus ensuring that new users pay their fair share of added burden for facilities capacity and services. Capacity Fees are owed for added burden : New connection 10. Change of use Expansion of facility Existing connection that did not pay May 3, 2018 Regular Board Meeting Agenda Pqr,kPt- Pant- 15A of 995 PATIO DINING IS AN EXPANSION OF RFSTAURANT Patio dining is any outdoor seating that a restaurant has installed for its customers' use . Patio dining represents an expansion on an existing parcel that requires Central San 's approval and payment of patio dining capacity fees . r _ , 4 s \ ryST f'L. _ "May 3, 2018 Regular Board Meeting Agenda P - - PATIO DINING IS A GROWING TREND October 9, 2015 "No matter what kind of establishment you run, a simple deck or patio can increase revenue by up to 30 percent. Additional research by the Simons Advisory Group proved that a $200, 000 investment increased overall sales by $500, 000 possibly more if your restaurant offers year-round outdoor seating. " https://www.fastcasua l.com/blogs/how-to-attract-guests-with-outdoor-seati ng/ August 1, 2017 'In a study of the Top 100 Bar and Nightclub venues, nearly three _ quarters (73%) sport an outdoorIw r patio, terrace or rooftop ace s — p p an increase from 63% in 2013. " https://www.trycake.com/blog/3-ways-outdoor-dining-boosts-restaurant-popularity/ �' � ' MENTORING PROJECT IDENTIFIED POTENTIAL FOR UNPAID PATIO DINING CAPACITY FEES Case Study Central San has an 31 Restaurants in estimated 780 restaurants Downtown in its enure service area . Walnut Creek With fees outdoordinin Case study of 31 ' Without aid outdoor restaurants on Locust ' Street in Downtown Walnut Creek. '��° OLA r din ng Majority (65% ) have outdoorLA 0 ' �n�outdoor unpaid dining with potential unpaid With o utdoo r din ing, 'Aifheutdoor fees unpap dining:.fees fees. paid Number of Restaurants with outdoor dining, fees unpaid - --v- - __ CAPACITY FEES CALCULATION EXAMPLE Capacity Area RUE Current Typical Calculation Fee (per 1,,000 S Factor Capacity Fee Restaurant $ 25,263 = 1 x 4.01 x $ 61300 - - • • $ 7,346 = 1 x 1.166 x $ 61300 Patio Dining $ 71346 = 1 x 1.166 x $ 61300 Building Area (Square Feet) is the Unit of Measure for Non- Residential Capacity Fees. Residential Unit Equivalent (RUE) Factor is based on specific flow and strength for each User Group. • . . : • Resta u ra nts 4.01 548 700 360 Deli/Bar/Coffee Shop 1.166 259 150 165 Patio Dining 1.166 165 700 360 "Biological Oxygen Demand (BOD) — ""Total Sus ended Solids TSS AGENCIES ARE MIXED ON CHARGING FOR PATIO DINING CAPACITY FEES . . . RESULTS . . FEE . East Bay Municipal EBMUD does not charge for patio dining area specifically as their No Utilities District capacity fees are based on historic water consumption data and business type. Dublin San RarnoT DSRSD charges 50% of regular charge per square footage for the Yes Services District4l patio dining when it is dedicated to the business (this rule applies to businesses like Starbucks as well if they have a dedicated outside sitting area). Dedicated represents planned seating submitted in the tenant improvement plan. Delta . • DDSD does not charge a fee for the patio dining area, only for the No Sanitationsquare footage inside the building. UnionUSD does not charge for patio dining - only charges per square No District foot inside the building. City of The City charges for the patio dining, if it is dedicated to the Yes restaurant, based on square footage. Ironhouse ISD charges dedicated patio dining area and it is charged Yes Sanitationadditionally based on the numbers of seats. Ross Valley RVSD does not charge for patio dining area. The patio seating does No Sanitationnot really matter since the charge depends only on the number of 49 fixtures in the premise. — Jack's Restaurant & Bar In & Out Burger Prima Panera � Katy's Kreek Kentucky Fried Chicken Cheesecake Factory Baja Fresh Urban Plates Dos Coyotes Starbucks Tender Greens Pressed Juicery Gott's Roadside Subway Vitality Bowl CRITERIA TO EVALUATE PATIO DINING FEES Fr7r --,�W -IN Fast • • • Fine Dining Take Out Fast Casual/ Deli/Coffee Quick Service Shop 4 M"ML ANA -1 • Tables Increase Customers • Tables provide Convenience for Customers • Increase Number of Servers • No Servers in patio • Additional food output • No Additional food output/Takeout food • China Plates/Silverware • Paper Plates/Plasticware • Alcohol Served in patio • No Alcohol in patio • D d ca d Di e-iA,. do ` FOOD SERVICE IN CENTRAL SAN SERVICE AREA Business - • 1w • Bakeries (RB) 23 3% Banquet Facilities (RC) 14 2% Coffee Shop & Deli (RD) 207 24% Ice Cream Parlors (RI) 14 2% Bars (RN) 46 5% Restaurants (RS) - dine in 496 56% Restaurants (RT) - take out 72 8% Yogurt Shops (RY) 8 1% Subtotal 880 100% "May 3, 2018 Re and Meeting Agenda P - - SERVICE AREA REVIEW OF 60 RESTAURANTS WITH PATIO DINING Restaurant raMM"M % of Patio Patio square feet square to Location feet . . 3,149 378 12% $ 2,773 3,586 355 10% $ 2,610 1,120 30 3% $ 220 San Ramon Restaurant 7,818 1,322 17% $ 9,711 Concord Restaurant Patio Dining in Seated Restaurant Patio Dining in Seated Restaurant Capacity Fee Status with 360 SF Allowance Capacity Fee Status Unpaid Capacity Unpaid Capacity Fees,6,10% Fees,2,3% PA Paid Capacity Fees,54,90% Paid Capacity Fees,58,97% Histogram Plot of Patio Sizes for Selected Seated Restaurants 9 120.00% 8 100.00% 7 6 80.00% c m 3 f0 5 Q) Q) 60.00% 0 Q 4 E 0 Z 3 40.00% 2 Frequency (Cumulative% 20.00% 1 F 0 0.00% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CU Ln o Ln o Ln o Ln o Ln o Ln o Ln o Ln o Ln o Ln o Ln o Ln o Ln o Ln o Ln o c-I ci N N M rn T T Ln Ln 1.0 LO I- F� co W Ql m o o N N M rn T T Ln r-I r-I ci ci ri ri rl --I c-I ci ri Patio Size (square feet) "May 3, 2018 Regular Board Meeting Agenda P - Pqnp IRA nf 99r; 'ERNATIVES FOR BOARD CONSIDERATION Continue to assess all food service establishments patio dining capacity fees as prescribed in the fee schedule. Revise the definition to assess patio dining capacity fees only to Seated Restaurants (RS) & Bars (RN ); The following would be exempt: Restaurants Take-out (RT) o Bakeries (RB) o Banquet Facilities (RC) o Coffee Shops and Delicatessens (RD) o Ice Cream Parlors (RI) o Yogurt Shops (RY) Revise the definition to assess patio dining as described in Option 2 and provide fora 360 square foot patio dining area allowance. Provide some other direction to staff 1 QUESTIONS ? "May 3, 2018 Re and Meeting Agenda P -