Item 427/2024
Final
City of Garden Grove
INTER-DEPARTMENT MEMORANDUM
To:
Lisa L. Kim From: Niki Wetzel
Dept:
City Manager Dept: Community Development
Date: 1/28/2025
Subject: Adoption of a Resolution adopting and amending various Planning and Building fees. (Action Item)
OBJECTIVE
For the City Council to conduct a public hearing and consider a resolution to adopt and amend various planning and building-related user and regulatory fees.
BACKGROUND
State law authorizes the City to adopt and implement fees, rates, and charges for municipal services up to the estimated reasonable cost of providing such services. The City Council has previously approved fees and charges for various City services. In 1994, the City Council adopted a Master Fee Schedule, which combined the City’s fees for various services into one document. A partial update to Planning and building-related fees was last conducted in September 2016.
DISCUSSION
User fees and charges are payments for voluntarily purchased, publicly provided services that benefit specific individuals or property owners , rather than the general public. Sound financial management principles encourage the full recovery of the costs for providing these services, as it protects the general public’s best interest. Since the fees and charges are to be established based on actual costs, it is necessary to review the fees on a regular basis to ensure appropriate cost recovery. Accordingly, the City commissioned a user and regulatory fee study by ClearSource Financial Consulting (ClearSource) to examine planning and building-related user and regulatory fees. The fee study commenced in FY 2023/24 and was finalized in FY 2024/25. Broadly, the fee study results indicate the following:
Building Fees
The Division collects approximately $3, 489,000 annually in fee revenues. Fee -related expenditures are anticipated to be approximately $4,333,000. This results in an aggregate cost recovery level of 81% and a General Fund subsidy of approximately $844,000 annually. As discussed below, a three-year phase-in to full cost recovery is recommended for building fees with an initial year cost recovery target of 87%.
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Planning Fees
The Division collects approx imately $301,000 annually in fee revenues. Fee -related expenditures are anticipated to be approximately $1,159,000. This results in an aggregate cost recovery level of 26% and a General Fund subsidy of approximately $858,000 annually. As discussed below, a three-year phase-in to full cost recovery is recommended for planning fees with an initial year cost recovery target of 63%.
Together, the fee study results indicate that Building and Planning user and regulatory fees recover less than the City’s full cost of providing fee-related services and result in a General Fund subsidy of approximately $1,702,000 per year.
Because user and regulatory fees typically correlated with high levels of direct benefit to the service recipient, communities frequently target full cost recovery for these development-related services. In order to allow the City to move toward full cost recovery, while being mindful of broad community goals and collaboration with the development community, staff recommends using a three year phase-in approach to enhance cost recovery levels with additional years adjustments based on annual increases in the Consumer Price Index (CPI) . The timing of the proposed fee adjustments, coinciding with the beginning of each fiscal year starting in FY 2025/26, is as follows:
Year 1 Fee Adjustment – Fiscal Year 2025/26
Year 2 Fee Adjustment – Fiscal Year 2026/27
Year 3 Fee Adjustment – Fiscal Year 2027/28
Additional Years commencing with Fiscal Year 2028/29 – CPI Adjustment
To assist the City Council in understanding how fees would increase over time in the three-year phase-in scenario, staff has prepared the table below which shows the current fee amount for top permit types processed in the Building and Planning Divisions a s well as fees in each of Years 1 through 3.
Building Division
Building Valuations Current
Fee Year 1 Year 2 Year 3
$100,001 - $500,000
(Additions & ADUs) $1,086 $1,239 $1,391 $1,544
$500,000 - $1,000,000 $3,226 $4,081 $4,935 $5,790
$1,000,001 and up
(Multi-Family) $5,576 $6,291 $7,005 $7,720
Planning Division
Planning Entitlements Current
Fee Year 1 Year 2 Year 3
Conditional Use Permits
– Alcohol (new fee) n/a $1,599 $3,197 $4,796
Conditional Use Permits
– All Other $3,150 $5,007 $6,863 $8,720
Site Plans $3,375 $6,247 $9,118 $11,990
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In the event that City Council prefers to recover costs more quickly , staff has prepared two additional scenarios for City Council consideration which are a two-year phase-in of fee adjustments (with additional years based on CPI) and an immediate adjustment of fees to full cost recovery/targeted cost recovery levels. All fees proposed for adoption in the three-year phase-in, two year phase -in, and immediate adjustment scenarios , and correspondi ng resolutions, are included as Attachments 1, 2, and 3 to this report respectively . Attachment 4 provides an illustration of current and proposed fees, and Attachment 5 provides the user and regulatory fee study in support of adjusting Building and Planning fees.
Regional Fee Comparison
Similar fees are collected by agencies throughout the region, and staff compared current and proposed fees to those collected by other agencies as included herein as Attachment 6 . For sampling purposes, the fee comparison examined fees for:
City of Costa Mesa
City of Fullerton
City of Fountain Valley
City of Orange
County of Orange
City of Santa Ana
City of Westminster
For Garden Grove, outcomes show that proposed fees are within range of other agencies in all years including at full cost recovery. Of note, the cities of Orange and Santa Ana use alternative structures for calculating building fees that don’t allow for apples-to-apples comparison.
New Fees and Adjustment to Collection Method
In preparing this fee update, staff considered new fees that could be added to address actual costs. Planning Services identified seven new fees, including two fees that are proposed to be reduced with implementation of this update (i.e., Conditional Use Permits for Live Entertainment and for the Sale of Alcohol as described below ). In addition, staff identified two existing fees where adjustment from a fixed rate to time and materials basis (T&M) would better recover actual costs. These existing fees, for Negative Declara tions (NDs) and Mitigated Negative Declarations (MNDs), are collected for the processing of environmental documentation required pursuant to the California Environmental Quality Act (CEQA). Environmental Impact Reports (EIRs), also CEQA environmental documents, already are collected on a T&M basis in the City’s existing fee structure.
Depending on the scope of a project, CEQA environmental documents may be highly technical and time-consuming for staff to process while others may be straight-forward. As such, several cities choose to use a T&M basis to recover actual costs. Like EIRs, staff proposes that all CEQA documents be processed on a T&M basis with this fee update. This includes adjusting the collection method for NDs and MNDs as well as establishing this collection method for new proposed fees for In-fill Exemptions (Class 32) and CEQA Addendums.
Each new fee is discussed below.
In-Fill Exemptions (Class 32): Projects subject to Class 32 In-fill Exemptions have increased in recent years as more in-fill housing projects are proposed. This exemption requires preparation of several technical studies which staff currently reviews at no charge. Staff proposes a fee to recover staff time necessary to review these studies on a T&M basis.
Item 427/2024
CEQA Addendum: Within the past five years, the City has processed four addendums to previously-approved Negative Declarations or Mitigated Negative Declarations. Currently, the City has no Addendum fee. Staff proposes a fee to recover staff time necessary to process these addendums on a T&M basis.
Density Bonus Application: Since 2018, the City has approved twelve housing projects requesting a State density bonus. Currently, there is no fee to review density bonus applications. Staff proposes a new fee to recover co sts associated with review of these projects’ eligibility for increased density and incentives, concessions, and waivers at a fee of $872 (full cost recovery in Year 3).
Annexations (Developer-Initiated): While only three developer-initiated annexations have been approved in the last 20 years, there is currently no fee to process these applications.
A fee is proposed to recover the cost of staff time needed to assess the impact of an annexation on city services and utilities, as well as the coordination with other government agencies at a fee of $4,360 (full cost recovery in Year 3). Development Agreements: Currently, the City does not have a fee for the processing of development agreements. Within the last 10 years, the City has approved six development agreements. Therefore, staff proposes a fee to recover staff time in processing development agreements at a fee of $3,052 (full cost recovery in Year 3). Conditional Use Permits for Live Entertainment and for the Sale of Alcohol: The City requires businesses intending to operate with live entertainment or to sell alcoholic beverages to obtain a Conditional Use Permit (CUP). Currently, the fee to process these CUPs is the same as any other CUP which would be $8,720 at full cost recovery in Year 3; however , staff recently standardized conditions of approval for these types of uses which has streamlined review and reduced staff time. Therefore, staff proposes to reduce the fee for these types of CUPs to a full cost recovery of $4,762 in Year 3.
Staff compared these fees to other agencies, and Attachment 7 provides comparison tables. In all cases, new fees are within the range of fees collected by other agencies, or the collection method for CEQA documentation is similar to other agencies.
Public Noticing and Next Steps
A public hearing is required to amend user and regulatory fees, and a notice was published on January 15, 2025 and again on January 22, 2025, in accordance with Government Code Sections 66018 and 6062(a). The proposed user fee changes and documentation were made available for public review at the City Clerk’s office and online, and were made available to parties that submitted a written request for prior notice.
If approved, the new fees can become effective 60 days after the adoption of the attached resolution; however, staff recommends that fees become effective on July 1, 2025 as in discussed in the three-year phase-in scenario. In the interim, staff would conduct outreach to alert the public of the fee update including direct emails to those who have used our VivaCivic plan review platform, posting at our public counters, and social media/website postings in collaboration with the Office of Community Relations. Staff would also use this time to update its forms and software systems to reflect updated fees.
Item 427/2024
FINANCIAL IMPACT
Under each of the proposed scenarios, the anticipated fiscal impact is $1,702,000 in additional cost recovery. However, the timing of the additional cost recovery will be influenced by the alternative phase-ins selected by City Council. The three alternatives are illustrated below:
Three Year Phase-In (Staff Recommendation): The enhanced cost recovery anticipated from the initial year phase -in included in the fee schedule update is $709,000 in additional General Fund revenues for Building and Planning fees together. An overview of current and proposed cost recovery is provided in the table below.
Two Year Phase-In: The enhanced cost recovery anticipated from t he initial year phase-in included in the fee schedule update is $1,062,000 in additional General Fund revenues for Building and Planning fees together. An overview of current and proposed cost recovery is provided in the table below.
Immediate Adjustment: The enhanced cost recovery anticipated from the initial year phase-in included in the fee schedule update is $1,702,000 in additional General Fund revenues for Building and Planning fees together. An overview of current and proposed cost recovery is provided in the table below.
RECOMMENDATION
It is recommended that the City Council:
Adopt a Resolution Adopting and Amending Various User and Regulatory Fees Based on a Three-Year Phase-In Attachment 1.
Description Cost of Service
Fee Cost
Recovery
General Fund
Subsidy
Incremental
Change
Overall Cost
Recovery
Current $5,492,000 $3,790,000 $1,702,000 69%
Year 1 $5,492,000 $4,499,000 $993,000 $709,000 82%
Year 2 $5,492,000 $4,996,000 $496,000 $497,000 91%
Year 3 $5,492,000 $5,492,000 $0 $496,000 100%
Total $1,702,000
Description Cost of Service
Fee Cost
Recovery
General Fund
Subsidy
Incremental
Change
Overall Cost
Recovery
Current $5,492,000 $3,790,000 $1,702,000 69%
Year 1 $5,492,000 $4,852,000 $640,000 $1,062,000 88%
Year 2 $5,492,000 $5,492,000 $0 $640,000 100%
Total $1,702,000
Description Cost of Service
Fee Cost
Recovery
General Fund
Subsidy
Incremental
Change
Overall Cost
Recovery
Current $5,492,000 $3,790,000 $1,702,000 69%
Year 1 $5,492,000 $5,492,000 $0 $1,702,000 100%
Total $1,702,000
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ALTERNATIVES
Alternatively, the City Council may either:
Adopt a Resolution Adopting and Amending Various User and Regulatory Fee s Based on a Two-Year Phase In Attachment 2.
Adopt a Resolution Adopting and Amending Various User and Regulatory Fees Based on an Immediate Adjustment to Full Cost Recovery Attachment 3. Recommend an alternative course of action.
ATTACHMENT(S)
1. Attachment 1: Resolution and Fee Schedule Based on Three Year Phase-In
2. Attachment 2: Resolution and Fee Schedule Based on Two Year Phase-In
3. Attachment 3: Resolution and Fee Schedule Based on Immediate Adjustment
4. Attachment 4: Illustration of Current and Proposed Fees and Charges
5. Attachment 5: Development Processing Fee Study- Building and Planning Fees
6. Attachment 6: Comparative Table of Select Building and Planning Fees
7. Attachment 7: Adjusted and New Fees