§ 18.156

A.

Purpose. This chapter establishes requirements for the Morgan Hill Residential Development Control System (RDCS). The purpose of the RDCS is to:

Establish a limit on the amount and rate of residential growth in Morgan Hill through 2035.

2.

Encourage high quality residential development that enhances residents' quality of life.

3.

Ensure that new residential development does not adversely impact the level of public services and infrastructure provided for current and future residents.

4.

Promote a diverse stock of high quality housing to meet the full range of housing needs within Morgan Hill.

5.

Encourage new residential development to contribute community benefits that enhance the public health, safety, and welfare.

6.

Encourage an orderly, efficient, and sustainable residential development pattern.

7.

Advance the goals and policies of the general plan and Downtown Specific Plan.

8.

Provide certainty to residents that residential development patterns will reflect local goals and values.

B.

History. The RDCS is a continuation and refinement of the voter-approved growth management system first established in Morgan Hill in 1977. The RDCS was originally approved by voters in response to concerns over the amount and pace of residential growth and the impacts of this growth on city services and infrastructure. RDCS ballot measures adopted by the voters include the following:

1.

Measure E (1977), which set a target population of thirty thousand for year 2000 and established the RDCS.

2.

Measure P (1990), which refined the RDCS and established a population ceiling of thirty-eight thousand eight hundred for 2010.

Measure C (2004), which again refined the RDCS and set the population ceiling to forty-eight thousand for 2020.

4.

Measure F (2006) and Measure A (2009), which established exemptions for units constructed Downtown.

5.

Measure S (2016), which was adopted in conjunction with the city's general plan update to further refine the RDCS and set the population ceiling to fifty-eight thousand two hundred for 2035.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

This ordinance (Chapter 18.156 of the Morgan Hill Municipal Code) was adopted by the voters of Morgan Hill in 2016 and may be amended or repealed only with voter approval except as specified in subsections A and B below.

A.

Amendments Allowed without Voter Approval. The following sections may be amended by an ordinance duly adopted by the city council in accordance with state law:

1.

18.156.120 (RDCS Procedures - Application Submittal and Review, Project Scoring, and Award of Allotments).

2.

18.156.130 (Pre-Application Review).

3.

18.156.140 (Project Phasing).

4.

18.156.150 (Land Use Entitlements Required).

5.

18.156.160 (Expiration of Allotments).

6.

18.156.170 (Extensions).

B.

Reorganizing and Renumbering of Municipal Code. The Morgan Hill Municipal Code may be reorganized or readopted in a different format, and individual provisions may be renumbered or reordered, in the course of ongoing updates of the municipal code, provided that the provisions of this chapter adopted by the voters of Morgan Hill in 2016 remains in the municipal code unless earlier repealed or amended by the voters or by the city council in accordance with subsection A, above.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

A.

Replacement of Prior RDCS Ordinance. This chapter repeals and replaces in its entirety the prior RDCS ordinances, previously codified in Division IV (Residential Development Code) of Title 18 (Zoning) of the Morgan Hill Municipal Code.

B.

Prior Actions Remain Valid. Any city action taken or approval granted pursuant to the prior RDCS ordinance is not affected by the enactment of this chapter. All future actions and approvals shall comply with this chapter.

C.

Previously Approved Allotments.

1.

Allotments awarded and exercised prior to March 1, 2017, shall remain valid and are not affected by this chapter.

2.

Allotments awarded prior to March 1, 2017, but which have not yet been exercised shall remain valid until the expiration date established at the time of allotment or as established in the project's development agreement. Applicant requests for an extension to the date by which these allotments must be exercised and city action on these requests are governed by Section 18.156.170 (Extensions) of this chapter.

D.

No Changes to Prior Projects Required. No provision of this chapter shall require any change in the plans, construction, or design of the portion of a project which received allotments prior to March 1, 2017.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.040 - Population limit.

A.

Maximum Population. Morgan Hill's population as of January 1, 2035 shall not exceed fifty-eight thousand two hundred.

B.

Ceiling, Not a Target. The fifty-eight thousand two hundred population limit is a maximum ceiling, not a target. The city is not required to actively strive to reach fifty-eight thousand two hundred residents by 2035. Instead, the city shall ensure that Morgan Hill's population does not exceed this limit by 2035 while continuing to meet the full range of housing needs in Morgan Hill.

C.

Limit to all Population Growth. Morgan Hill's population limit is intended to limit all population growth, including growth from new housing exempt from receiving RDCS allotments as specified in Section 18.156.050.C (Exemptions from Allotments) and set-aside allotments awarded as allowed by Section 18.156.070 (Downtown and Agricultural Preservation Set Asides). The number of allotments available each year and the process to adjust this number is intended to ensure that residential growth from all sources does not result in a population that exceeds the population limit of fifty-eight thousand two hundred residents in 2035.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

A.

Allotments Based on Population Limit. The city council shall establish a maximum number of residential allotments available each year, not to exceed two hundred fifteen allotments per year, such that the population in Morgan Hill does not exceed fifty-eight thousand two hundred as of January 1, 2035.

B.

Allotment Requirement. A residential allotment authorizes an applicant to apply for land use entitlements and to construct these units should the city approve these entitlements. No residential unit may be developed without first obtaining an allotment, except for exempt units specified in Section C below.

C.

Exemptions from Allotments. The following types of residential projects may be developed without first receiving any allotments:

1.

One single-family home on a lot existing as of March 1, 2017;

2.

Secondary dwelling units;

The conversion of an existing single-family home into a duplex provided that a new detached primary structure is not constructed on the lot or lots;

4.

Assisted living/nursing homes; and

5.

The annexation of existing dwelling units outside of city limits into the city.

D.

Timing of Allotment Use. To maintain a steady rate of residential development, allotments must be used ("exercised") by a specific date as established in Section 18.156.160 (Expiration of Allotments). Allotments that are not used by the specified date expire and are no longer valid. Projects with expired allotments must reapply for allotments in the same manner as all other new proposed projects requesting allotments.

E.

Rate of Growth. The planning commission shall allocate available allotments each year with the goal of maintaining a steady rate of growth.

F.

Cancellation of Allotment Awards. The city council may cancel the process to award allotments upon finding that public services and facilities are inadequate to accommodate additional residential development and that awarding allotments would significantly impact the public health, safety and welfare.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.060 - Downtown and agricultural preservation set asides.

A.

General. Through 2035 a certain number of allotments are set aside for residential projects in Downtown Morgan Hill and for projects that contribute to the city's agricultural preservation goals.

B.

Eligibility. To be eligible to receive set-aside allotments, a project must receive at least eighty percent of the total maximum score in the RDCS competition criteria.

C.

Competition Not Required. Eligible projects are not required to compete for set-aside allotments. Instead, allotments are issued to eligible projects by the planning commission on a first-come, first- served basis up to the total number of available set-aside allotments each year.

D.

Number of Available Set-Aside Allotments.

1.

Downtown Set-Asides. Through 2035, five hundred allotments are set aside for housing within the Downtown Specific Plan boundaries set forth in the city's general plan as of July 27, 2016. No more than one hundred set-aside allotments are available for downtown projects within a single year.

2.

Agricultural Preservation Set-Asides. Through 2035, three hundred allotments are set-aside for housing that may be applied anywhere within the city. Recipient projects must directly establish permanent agricultural conservation easements within the city limits or within the city's priority agricultural conservation area. Easements must be established within the city's sphere of influence in a manner consistent with the citywide agricultural lands preservation program. The number of allotments granted to an eligible project shall be commensurate with the community benefit obtained from the resulting preservation of agricultural lands. No more than thirty-five set-aside allotments are available for agricultural preservation projects within a single year.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.070 - Urban service area boundaries.

A.

Allotments within Urban Service Area Only. The city may approve allotments only for projects located within the city's urban service area boundaries.

B.

Application to Expand Urban Service Area. The city may apply to the Santa Clara County Local Agency Formation Commission to expand the urban service area boundary of the city to accommodate additional residential development if the city council first makes all of the following findings supported by substantial evidence on the record of a duly noticed public hearing on the matter:

1.

The expansion is necessary to accommodate the amount, rate, location, and type of residential development envisioned in the general plan.

2.

The expansion is consistent with any city adopted plans, policies, or ordinances specifying a preferred sequence of future annexations.

3.

Public services and infrastructure are or will be sufficient to accommodate development resulting from the expansion of the urban service area boundary. Additional development will not adversely impact public

services and infrastructure, including public schools, the transportation system, parks, police, fire service, storm drainage, wastewater, and water service.

4.

The expansion supports an orderly development pattern that prioritizes infill development adjacent to existing development and served by existing public services and infrastructure.

5.

The expansion is necessary to accommodate the housing and/or employment needs of Morgan Hill.

6.

The expansion promotes fiscal responsibility, cost-effective service delivery, and the city's ability to plan for and adequately maintain urban services over time.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

A.

Annual Competition. Each year the city may conduct a competition for allotments for development of residential units, except when the city council cancels the competition allowed by Paragraph D below. Projects exempt from the RDCS competition as specified in Section 18.156.050.C (Exemptions from Allotments) and projects eligible for set-aside allotments as specified in Section 18.156.060 (Downtown and Agricultural Preservation Set Asides) do not participate in the competition.

B.

Minimum Score. To be eligible to compete for allotments, a project must receive a minimum score of at least eighty percent of the total maximum score in the RDCS competition criteria.

C.

Award of Allotments. The planning commission shall award allotments based on a scoring of projects using criteria established by the city council pursuant to Section 18.156.100 (Competition Manual). The planning commission may award a project fewer than the total number of allotments requested by the applicant. In such a case, the planning commission may award the surplus allotments to the next highest scoring projects if doing so would help create a more balanced and equitable distribution of allotments and help to achieve the goals of the general plan.

D.

Cancellation of Allotment Awards. The city council may cancel the process to award allotments upon finding that public services and facilities are inadequate to accommodate additional residential development and that awarding allotments would significantly impact the public health, safety and welfare, or if there is insufficient demand necessary to produce high quality developments.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

A.

General. Each year the city council may establish competition categories for certain types of projects. Projects within a competition category will compete for allotments only with other projects in the same competition category. For each competition category, the city council shall identify the number of allotments available for projects competing within the competition category.

B.

Example Competition Categories. Example of competition categories may include, but are not limited to, projects within the Monterey Road corridor, small projects (less than fifteen units), senior housing, vertical mixed use, and multifamily rental.

C.

Affordable Housing. When establishing competition categories, the city council shall ensure that an adequate number of allotments are available for affordable housing projects consistent with the city's regional housing needs allocation (RHNA) and adopted housing element.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.100 - Competition manual.

The city council shall adopt and maintain an RDCS competition manual that establishes criteria and point values for the RDCS competition. The competition manual shall define terms and provide detail as needed to ensure that the city awards points consistently for all competing projects.

A.

Competition Criteria. The competition manual shall identify the criteria that the city will use to award allotments to competing projects. Competition criteria in the competition manual shall advance the nine city objectives below, which may be modified only with voter approval.

1.

Schools. Provide safe and convenient access to schools and ensure high quality schools in Morgan Hill.

2.

Location. Encourage infill development adjacent to existing development and close to existing community services and facilities.

3.

Affordable Housing. Increase the supply of housing affordable to households of all incomes levels.

Housing Diversity. Provide a variety of housing types and sizes to meet the range of housing needs within Morgan Hill.

5.

Parks and Open Space. Provide high quality parks and recreational facilities and protect and preserve open space and productive agricultural land.

6.

Environmental Protection. Increase energy efficiency, renewable energy, energy conservation, water conservation, habitat protection, and achieve other sustainability goals.

7.

Transportation. Support a balanced and efficient transportation system for pedestrians, cyclists, public transit, and automobiles that maintains quality of life in residential neighborhoods.

8.

Infrastructure and Services. Emphasize efficient use of public infrastructure and services.

9.

Project Quality. Ensure quality design related to general livability, public safety, neighborhood form, site planning, building design, and landscape design.

B.

Points. The Competition Manual shall establish points available for competition criteria that advance the city goals identified in Section A above.

1.

Limitations on Number of Points and Changes. The total number of points for each of the nine objectives above (e.g., schools, location, affordable housing, etc.) shall be no more than twenty percent and no less than five percent of the total number of available RDCS competition points. The city council may adjust the number of points within each objective by no more than fifteen percent of the points available within the objective the previous year.

2.

Intent of Points. Points shall be awarded only for projects that provide for excellence in project design and provide a community benefit that exceeds minimum requirements of the city and other governmental agencies. All projects must comply with city standards established in the general plan, municipal code, and other city rules and regulations together with other applicable laws.

C.

Revisions to Criteria and Points. In order to promote long term consistency and reduce uncertainty for applicants for residential development, the city council shall amend competition criteria and point values in the competition manual only when necessary and no more frequently than once a year. The planning commission shall recommend to the city council any revisions to the competition criteria and/or point values. If amended, competition criteria and/or point values shall be established no later than six months prior to the RDCS application submittal deadline.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.110 - Number of available allotments.

A.

Annual Allocations. Beginning with the competition in year 2017, the city may allocate no more than two hundred fifteen allotments in any given year for residential development that must compete for allotments. Set-aside allotments as described in Section 18.156.060 (Downtown and Agricultural Preservation SetAsides) may be awarded in addition to the annual allotment maximum.

B.

Annual Reductions to Available Allotments. Each year staff shall provide the planning commission with an assessment of conditions, per the findings below, that may necessitate a reduction in the number of available allotments. No later than six months prior to the RDCS application submittal deadline each year, the planning commission may recommend and the city council may reduce the number of available allotments for an RDCS competition year upon finding that:

1.

Reducing the number of allotments is necessary to prevent a sudden spike in construction of new housing caused by a backlog of awarded allotments which have not yet been exercised.

2.

Public infrastructure and services are or will be inadequate to accommodate the new development. Public infrastructure and services include public schools, the transportation system, parks, police, fire service, storm drainage, wastewater, and water service.

3.

Other conditions are present that necessitate a reduction in the number of available allotments to achieve the RDCS purpose as stated in Section 18.156.010 (RDCS Purpose and History).

4.

Downtown and/or agricultural preservation set-aside allotments have been issued. The number of annual allotments must be reduced to address the issuance of any set-aside allotments.

5.

There is insufficient demand necessary to produce high quality developments or public benefits.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.120 - RDCS procedures—Application submittal and review, project scoring, and award of allotments [CCA].

A.

Pre-Competition Orientation. The city shall hold an open pre-competition orientation meeting at least four months prior to the RDCS application submittal deadline. At this meeting the city shall review with prospective applicants the RDCS schedule, application requirements, and competition criteria for awarding points.

B.

Pre-Application Review. To be eligible to submit an RDCS application, applicants must have completed pre-application review as described in Section 18.156.130 (Pre-Application Review).

C.

Applications. Applicants shall submit an RDCS application consisting of the information and materials required by the city. Applications shall be submitted on a date determined by the community development director. Applications may not be modified after submittal except as otherwise provided for in this chapter.

D.

General Plan and Zoning Consistency Determination. After deeming an RDCS application complete, the community development director or the director's designee shall evaluate each application for consistency with the city's general plan and zoning code and reject any applications which are found to be inconsistent with either the city's general plan or zoning code. The community development director's determination is appealable to the city council. The city council may direct the applicant to make modifications to the application and if these modifications bring the application into compliance with the general plan and zoning code the application may continue to compete for allotments.

E.

Staff Scoring of Applications. After deeming an RDCS application complete and consistent with the general plan and zoning code, the community development director or director's designee shall recommend point assignments to projects using scoring criteria established by the city council. City staff shall forward recommended scoring to the planning commission.

F.

Planning Commission Hearings — Project Scores. The planning commission shall hold a public hearing to consider the scoring recommendation and to make a final determination of project scoring.

G.

Staff Recommendation — Award of Allotments. After the completion of the appeal period following the planning commission determination of project scoring, the community development director or the

director's designee shall recommend the award of allotments based on the project scoring. City staff shall forward recommended award of allotments to the planning commission.

H.

Planning Commission Hearings — Award of Allotments. The planning commission shall hold a public hearing to consider the award of allotment recommendation and to award allotments based on the project scoring. The planning commission may award fewer than the total number of allotments requested for a project and may award allotments to lower-scoring projects if doing so would create a more balanced and equitable distribution of allotments and help to achieve the goals of the general plan.

I.

Appeals. All decisions of the planning commission may be appealed to the city council pursuant to municipal code Chapter 18.64.112.

J.

Development Agreement. The city may issue building permits only after the applicant has entered into a development agreement with the city confirming the specific development commitments made by the applicant at the time the planning commission awarded allotments.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.130 - Pre-application review [CCA].

A.

Pre-Application Review Requirement. Applicants may apply for allotments only after completing the preapplication review process. Pre-application review is required only once for a development project - projects which previously received allotments and reapply for additional allotments in subsequent competitions are not required to complete pre-application review again prior to reapplication. Significant changes to a project, as determined by the community development director, will require pre-application review.

B.

Project Quality and Consistency. Pre-application review allows city staff to evaluate the overall project quality as well as consistency with the general plan, any applicable specific plan, the Morgan Hill Municipal Code, architectural review handbook, and other applicable city rules and regulations. Pre-application review is intended to help ensure that projects receiving allotments can be built consistent with their approved RDCS application.

C.

Timing and Schedule. The community development director shall establish a schedule for submittal of materials and city staff review that provides sufficient time for the completion of pre-application review prior to the RDCS application submittal date.

D.

Project Information Required. Applicants shall submit information and materials for pre- application review necessary to present the project concept and demonstrate compliance with city land use and neighborhood design policies in the general plan. Detailed architectural plans are not required. Materials submitted for pre-application review become part of the public record and are not confidential.

E.

Multi-Department Review. The city planning division of the community development department, engineering division of the public works department, and other city staff involved in the land use entitlement approval process shall participate in the pre-application review.

F.

Review Letter. After reviewing the submittal and meeting with the applicant, the community development director shall provide applicants with a pre-application review letter either making a preliminary finding that for the purposes of the RDCS competition the project is consistent with city policies and ordinances, or

recommending changes to a project necessary to achieve consistency with those policies and regulations. The pre-application review letter is not a project approval or final determination by the city as to a project's conformity to city policies and ordinances.

G.

Applicant Response. Applicants shall submit their pre-application review letter with their allotment application and any response, if needed, detailing the changes made to the project to address staff comments, or reasons why changes were not possible or desirable.

H.

Planning Commission Consideration. The planning commission shall consider the pre-application review letter and the applicant's response to the letter when awarding competition points under the project quality criteria category.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

A.

Multi-Year Allotments. The planning commission may distribute allotments awarded to a single project over multiple years as allowed by this section.

B.

Intent. Multi-year allotments are intended to support a fair and efficient RDCS process by allowing high quality projects constructed over multiple years to compete one time for allotments.

C.

Eligibility. The planning commission shall have the discretion to determine which projects are eligible for multi-year allotments.

D.

Number of Years. The planning commission may award allotments over a period of up to:

1.

Three years for projects with less than one hundred units; and

2.

Five years for projects with one hundred or more units.

E.

Findings. The planning commission may award multi-year allotments to projects only upon finding that:

1.

The multi-year allotments will support a steady rate of growth and help to avoid a sudden spike in construction of new housing;

2.

The multi-year allotments will help the city to plan for adequate public services and infrastructure to accommodate new development;

3.

The city will benefit from requiring the applicant to compete only once to receive allotments for all project phases; and

4.

An adequate number of allotments will remain in future years to accommodate a range of housing types to meet Morgan Hill's housing needs.

F.

Use of Allotments.

1.

Multi-year allotments must be exercised by the date specified by the Planning Commission consistent with Section 18.156.160 (Expiration of Allotments).

2.

If allotments for one year are not exercised by the specified expiration date, all multi-year allotments awarded to the project shall expire.

G.

Regular Rate of Growth. Allotments awarded for future years shall be subtracted from the number of allotments available to other projects in those years so as to maintain a regular rate of growth consistent with the RDCS.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.150 - Land use entitlements required [CCA].

A.

Authorization to Apply for Entitlements. An award of an allotment is not an entitlement to develop. Allotments authorize an applicant to apply for land use entitlements and to construct these units should the city approve the required land use entitlements.

B.

Effective Allotment. Applicants may submit an application for land use entitlements only after receiving an award of allotment. Planned development zoning applications may be filed prior to receiving an award of allotment.

C.

Finding of Compliance with Approved RDCS Application. To approve land use entitlements, the city must find that the project substantially complies with the RDCS application as approved by the planning commission.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

18.156.160 - Expiration of allotments [CCA].

A.

Exercise of Allotment. Allotments must be exercised within thirty months of approval or by an alternative date specified in the development agreement. An allotment is considered exercised with the recordation of a final map, issuance of a grading permit, or the commencement of construction if no final map or grading permit is required. The city may grant an extension to an allotment only as permitted under Section 18.156.170 (Extensions).

B.

Expiration. Allotments that are not exercised consistent with the terms above expire the day following the exercise date specified in the development agreement.

C.

Reapplication. Projects with expired allotments must reapply for allotments in the same manner as all other new proposed projects requesting allotments.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)

A.

General. The city may approve an extension to the date by which an allotment must be exercised only as allowed by this section.

B.

Extension Request. Extension requests shall be submitted in writing to the community development department a minimum of sixty days prior to the allotment expiration date and shall describe how the project meets the extension eligibility criteria in Subsection F below.

C.

Administrative Extension. For projects that received allotments under the previous RDCS, but have not secured a development agreement, the community development director may issue a six month extension.

D.

Number and Duration. In addition to receiving an administrative extension and/or prior extensions under the previous RDCS, a project may receive no more than one extension for a maximum one additional year period. Phased projects may only receive one one-year extension.

E.

Public Notice and Hearing. The planning commission shall review and act on an extension request at a noticed public hearing.

F.

Eligibility Criteria.

1.

The planning commission may approve an extension only when the city or other public agency is responsible for a delay in the issuance of permits or granting approvals required to exercise the allotments, or due to an earthquake, flood, fire, or other severe act of nature outside of the applicant's control. It is the applicant's responsibility to provide evidence that the request is consistent with this requirement.

2.

The planning commission may not approve an extension for any reason other than in Paragraph E.1 above, including but not limited to difficulties obtaining financing, changes to the project not required by the city or

other public agencies, applicant delays responding to requests from the city or other public agency, personal circumstances of the applicant, or changes in property ownership.

G.

Appeals. Planning commission denial of a requested extension may be appealed to the city council. The city council may grant the appeal only upon finding that the request complies with the eligibility criteria in Paragraph F above.

H.

Effect of Denial. If a request for extension is denied, the allotments shall expire the day following the exercise date specified in the development agreement. Projects with expired allotments must reapply for allotments in the same manner as all other new proposed projects requesting allotments.

(Ord. No. 2277 N.S., § 5(Exh. A), 6-6-2018)