Planning staff recommends the City Council receive and review this second implementation report on the new Zoning Regulations adopted by the City Council last year. As part of the public hearings and development of the code, it was understood there would be a period of adjustment and fine-tuning during the first year of the new code. The new code was adopted on final reading on January 25, 2021, and implementation began on the effective date of February 25, 2021.

For this second report, planning staff is monitoring for possible improvements as well as covering the successes of the new code during the first 10 months of code implementation. Staff has been tracking some minor code errors (spelling, cross-references, inconsistencies) as well as some issues that will require continued monitoring by staff. These issues may result in future proposals to amend the code to adjust these new rules. Staff is preparing a "housekeeping" ordinance to correct the minor code errors and will bring that to the Council later this winter. The current docket for zoning items for the Council is full (five zone changes) so it will likely move forward in March or April depending on the number of applications Planning receives in the next 60 days.

In January 2021, the City Council repealed the previous 1972 zoning regulations and adopted an entirely new set of zoning districts and code to help implement the adopted 2016 Growth Policy. The drafting and public hearing process, initiated by the City and County and guided by the Planning Board, took 3.5 years. The community effort included the hiring of a consultant team to assist Planning staff and a citizen-led Steering Committee and Working Groups through the drafting process. All topics from the mundane to the controversial were included during these deliberations. The result of this effort is a modern zoning code that was tailored to fit the Billings community and to lead it closer to community growth goals of housing choices, place-making, walk-ability, resiliency and prosperity.

It was acknowledged at the final public hearing during adoption that Planning staff would continue to review and track issues related to code implementation. Planning staff has compiled a list of errors as well as a list of code issues we are tracking for possible future amendments to the new code. This is not to imply the new code has serious flaws or is not working as it was intended - very good is not the enemy of perfect. These few errors and issues are minor in comparison to the positive effect the new code has had on residential projects and several major commercial projects in the first 10 months of the new code. Several times a week, Planning staff is providing information to homeowners and designers about building additions, new garage space and outdoor living spaces that are now allowed by the new zoning. These incremental investments would have previously required zoning variances or zone changes for these owners to accomplish a small improvement to their property. As the demand for housing has increased substantially in 2021, builders and developers are not the only beneficiaries of the new code flexibility, that also provides less reliance on old metrics such as minimum lot area and large property line setbacks more appropriate to a rural development pattern.

New Developments in 2021
The City has issued more new construction building permits in 2021 (746) than in any prior year - going back to before 1995. The added property value to the city's tax base 2021 is over $277 million dollars in new construction. This new construction will add over 1,200 new dwelling units - 446 single family homes, 141 townhome dwellings and 668 new apartments. Additions and remodels for residential homes is also keeping pace with 282 remodeling permits issued adding over $7.5 million dollars in value to existing neighborhoods. Residents have been taking advantage of the new rules that expand the area available on their lots for buildings (lot coverage increases), and re-discovered the investment value of in-town lots in Billings' first neighborhoods. Re-investment in Billings neighborhoods is happening at a brisk pace. Re-investments will help sustain and increase property values in these neighborhoods, and sustain the city's ability to renovate and replace the infrastructure over the long term. Commercial additions, remodels and re-use of existing commercial buildings have kept pace with the residential work. Substantial re-development and infill commercial projects are underway including the rehab of the Big Bear Sports retail space for 5 new stores, and new restaurants on King Ave East, Shiloh Road, Grand Avenue and King Ave West area. A new Albertson's grocery store and pharmacy is under construction at 54th St West and Grand Avenue and a major remodel at the Four Seasons Plaza on Main Street is underway to bring in Shamrock Foods.

Planning staff worked with property owners during the first 6 months of the new code and map, checking for zone district errors. Over 62,000 tax parcels needed to be updated and translated to new zoning districts as part of the new zone code adoption. Since adoption, City and County staff as well as property owners have located and corrected map errors including updating all City-owned park parcels to the new Public 1 (P1) zone district, updating the YWCA to a Public 3 - Civic Campus (P3), correcting "bleed over" district errors especially where districts change on side property lines. In all, about 24 parcels had errors corrected over the last 10 months.

The issues we are tracking for future code amendments are included in the attached table. In general, the issues concern Building and Siting Standards for some Neighborhood zone districts including maximum building width, minimum front lot line coverage and build-to zone averaging.

Implementation
Planning staff is meeting internally twice a month to review code implementation, increase the core knowledge of each planner and help to resolve complex or complicated development questions. This twice-a-month staff training has also helped develop the attached table of errors and issues that need to be monitored and tracked for possible future amendments to make the code even better than it is right now. Planning staff is also working closely with Engineering and Public Works staff to ensure we are tracking any inconsistencies across city code sections and regulatory jurisdictions. A prime example is the zoning-based assessment rates the Council uses to fund arterial street construction and storm water management. The Council approved an amendment to the city code in 2021 to update the arterial street funding section to incorporate the new zone districts. The new assessment fees were subsequently adopted and have helped even out the previous disparity of assessment fees based on the excessive number of zone districts in the previous zoning code.

Every day, the new zoning code is implemented in dozens of permit reviews, clarifications to clients and customers, re-build letters to lenders and insurers, and customer questions at the Planning counter. The results of these everyday decisions will become clearer as we proceed through the coming years of the new code and the development potential it provides to the city and to neighborhoods. Proportionate compliance for landscaping on commercial sites is being implemented for several remodel projects including the Albertson's on N 27th Street, the Pier One building (Skechers) on S 24th St West, and for a new City Brew facility on Gabel Road, to name just a few. The community will appreciate the street frontage landscape improvements on these and several other remodel and upgrade projects in Billings in the coming year.

Planning staff has kept in constant contact with the development community as we implement the new code. This includes design professionals, engineering firms, the Home Builders Association, and the many real estate professionals throughout Billings. Through these daily, weekly and monthly conversations, we have tracked minor errors and cross-reference issues as well as the other items to be cognizant of with the new zoning code. We have compiled this into a table format that is attached to this report and will help us through the next few months of exercising the new code. First and foremost, we have not experienced any major issues with the new zoning code, beyond some site specific design challenges. Implementing new processes does present challenges for applicants and staff as we iron-out issues and concerns. The flow charts created for the Administrative section of the new code (27-1600) do assist with smoothing the review and procedures. We have not had any reports from the development community about any serious or major problems with the code.

The following issues are being tracked and monitored by Planning staff.

Inter-code Consistency
The City Code consists of 28 chapters regulating everything from how Council meetings are run to how developers handle storm water management. Whenever a major section is repealed and updated, some inconsistencies will occur within the other code chapters. Planning staff has identified a few of those consistency issues within the Subdivision regulations (Chapter 23) and the new zoning code. In addition, codes implemented by other departments like Fire have proven some consistency challenges also. Planning staff intends to continue to review other city code sections to see if additional code sections have conflicts.

Building activity and permitting has significantly increased in 2021 - just in time to put the new zoning code through its paces.

1. Block Face Average - Built-to Zone (N1-2, NX1-3) The site design requirements for these zone districts has both a Build-To Zone - a range measured from the front lot line to where the building can be placed and a Block Face Average to be used whenever an infill project is proposed. This infill project could include a remodel or re-build of a structure. The previous zoning regulations required a minimum setback, but no maximum. Build-To zones are ideal because they provide enough flexibility to fit most types of site design, but enough predictability to make a street or neighborhood feel consistent. The Block Face Average is a tool intended to help infill - rebuilds or remodels - fit within the fine grain of an established street. The Block Face Average requires measuring the building setbacks on the two adjacent lots on either side of the subject parcel to come up with an average setback for the infill project. The Block Face Average overrides the Build-To Zone. In theory this should result in a better fit for the neighborhood. In practice, so far, staff has found the result to be less than ideal. Two main factors are effecting this result: lots with "missing teeth" and utility locations. Planning staff will continue to review this regulation and will present alternatives if needed at the 7-month report to Council. 
2. Front Load Garages in Mixed Residential (NX1-3) One of the key elements in the zoning code update was to better balance the interface areas between residential uses, pedestrians and vehicle traffic. This all happens between the small area between the front of a building and the street curb. Getting the right balance of elements that gives safety to walkers, bicyclists, driver's and residents is essential. Mixed residential zones typically will have more residents per linear foot of street frontage so giving more safety to walkers and residents is important. One of the ways you minimize conflicts between cars and people on foot is to dedicate space for each one. A side-by-side townhome apartment that dedicates more than half of the linear street frontage to driveway openings, is not a safe place for walking. This development pattern is apparent in many of the multi-family developments built in the last decade. The HBA has requested the city re-evaluate the prohibition on street front loading garages in the Mixed Residential zone districts. Planning staff, the HBA and other stakeholders will continue to monitor and evaluate this item.
3. Administrative Relief for Setbacks - Administrative Relief is available from any minimum (or maximum) setback up to 5 feet in reduction or increase. Staff believes some clarifying language is needed in this section to ensure staff and designers know when this applies and when a Board of Adjustment variance is needed instead. For example, most districts require a minimum 5-foot side property line setback. Administrative Relief should not be available to reduce this setback to zero. This should receive a variance approval from the Board of Adjustment.
4. Rebuild of Existing Residential Uses in Mixed Use zones - Mixed use zone districts do have existing residential uses including single family, two family and multi-family dwellings. The current code does not allow the re-establishment of a residential-only use if it is destroyed or abandoned. The re-build would have to include a ground-floor street front commercial use in the new building. The code does allow re-build for any nonconforming residential use in a Neighborhood zone district, but does not allow this in the mixed-use zone districts. These mixed use districts include Neighborhood Mixed Use, Corridor Mixed Use, Downtown Support, Central Business District, and two EBURD zone districts.
5. Zone Change Application Required for All Annexations - The code requires submittal of a zone change upon requesting annexation. Prior to the new code requirement, the city had one "default" zone district. Staff believes with some criteria in place, a zone district for property that has petitioned for annexation to the city could be set without the need for the property owner to submit a zone change. Larger parcels that trigger a Planned Neighborhood Development would not qualify for this exemption from a zone change application. This exemption would most likely apply to property that is surrounded or adjacent to the existing city limits, the city zoning is not variable in the area, the parcel is already developed, or the parcel already has an identical city zone district such as Light Industrial, Heavy Commercial or Heavy Industrial. 
6. Implementation of the new Special Review Criteria - Planning staff, advisory boards and the City Council are learning the new decision criteria for special review uses. The current code is not clear on how existing developed sites should be handled when a re-development includes a special review use. Special review uses not only include bars and casinos, but churches, day care centers, retirement communities and drive-through restaurants in some districts. The code should be clarified on what site elements must be brought into compliance with the new code in particular landscaping, signs, and off-street parking design. There should also be flexibility to allow site difficulties related to physical constraints to guide whether conformance with new standards is required.

Alternatives to resolve these code issues will be presented at the third and final warranty report to the Council later in 2022.

City Council may:

• Give general direction to staff on the issues presented in the work session memo or other items staff may monitor in the near future.

The Planning Division budget will not be effected by providing this Zoning Code update. Ongoing management and monitoring of the zoning code, as well as developing proposed amendments or adjustments that need formal action, will take staff time. However, this work is expected in any regulatory implementation process.