Reconsideration of Development Related Cost of
Service Fee Study and Associated Adopted Fees
City Council Meeting
February 4, 2025
1 Gabe Osburn, Director
Planning & Economic Development
User Fee Background
• In 2004, City Council approved Financial Strategies
• For all services determined to be “development-related”, a cost recovery level of 100% is desired.
• Development user fee study was completed in 2013 and adopted by City Council in early 2014
• Achieved cost recovery ranging from 50% to 90% of the full cost calculations. • March 5, 2024, Council updated fees based on study from MGT Consulting • Set fees at full cost
• Resulted in both increases and decreases in fees.
• Council approved fee reductions for certain project types 2 Approved Fee Reductions
3 Activity Type Fee Reduction
Building Permits (Mechanical, Plumbing, Electrical) 25% Planning Appeal Fee (Non-applicant) 90%
Daycare Facilities 50%
Grocery Store (Downtown or Food Desert) 50%
Downtown Housing (4 Units or Greater) 50%
Affordable Housing (100% - 60% less of AMI) 50%
Encroachment Permit (Residential Sidewalk Replacement) 50% 3 Fee Update Challenges
4 • Regulations increase and trigger additional review hours • Balancing rising costs with the need to encourage participation in application processes • Reduce permit avoidance
• Community Engagement
• Majority of feedback provided by development community • Homeowners typically provide input once confronted with fees through permitting • Reliance on Technology
• Additional reliance on technology – increases in annual costs • Supporting Advance Planning Initiatives
• Trigger significant consultant costs
4 6-Month Review
5 • Opportunity to analyze real world application of fee structure and better understand impacts to individual projects
• Collect issues and potential solutions identified staff through enforcement of fee schedule
• Obtain feedback from the community
• Provide the Council with the opportunity to make corrections and modifications without significant time delays
5 Total Development Applications Received vs Development Revenue & Expenditures
6 • Expenditures include the Administration Division
• Expenditures exclude Economic Development and Code
Enforcement
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
0 2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
15-16 16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24
Revenue/Expenditures
# of Applications Received
Fiscal Year
Development Applications Received
Building Engineering Planning Revenue Expenditures
Cost Recovery 73% 83% 72% 59% 58% 56% 62% 48% 44% 6 Development Revenue by Division
7 0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
Building Engineering Planning
Revenue
Development Revenue in Q1 & Q2 by Fiscal Year
FY 22-23 FY 23-24 FY 24-25
7 Development Surcharge Revenue
8 $-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
Technology Surcharge Advance Planning Surcharge
Revenue
Revenue in Q1 & Q2 by Fiscal Year
FY 22-23 FY 23-24 FY 24-25
8 9
Encroachment Permits
• Previously based on percentage of project cost
• Current fee schedule shifted to set rate for each improvement • Resulted in both increases and decreases
Public Improvement Plans and Subdivision Maps
• Maintained fee based on percentage of valuation
• Fee for small subdivisions (4 lots and under) experienced increase • Fee decreases for larger projects
Engineering
9 Engineering
10 Community Feedback
• Fees for driveway replacement too high
• Debris contains Encroachment Permit too high
Recommendation
• Add fee for condominium conversion (reduction – new fee at full cost) • Adjust staff houris for debris container permit (reduction – process improvement) • Adjust staff hours for SB9 review (reduction – process improvement) • Adjust staff hours for lot line adjustment/merger (increase) • Adjust staff hours Certificate of Compliance (increase) 10 Planning
11 Planning Entitlements
• Certain permits heavily subsidized under previous fee schedule • Certain fees experienced significant increases when set at full cost recovery due to board/commission processes and the inclusion of cross support hours from other departments
• Increases in Use Permits, Landmark Alteration and Design Review • Decreases in Tentative Map applications
• Increases in Tree Removal permits
11 Planning
12 Community Feedback
• Cost of Landmark Alteration Permits too high
• Cost for short term rental renewals too high
• Cost for certain minor uses to obtain Use Permit too high • Cost of tree removal permits too high
12 Planning
13 Recommendations
• Focus future modifications on homeowner and small business initiated requests
• Provide reduction for tree removal permits (reduction - subsidy) • Study potential time savings when multiple applications submitted for a single project (reduction – process improvement )
• Analyze potential reductions on certain Use Permits (reduction – subsidy and process improvements)
Previous Actions
• Short term rental renewal process modified and fee reduced 13 Building
14 Building Permits
• Small increases and decreases
• Significant increase to multi-family developments, but still lower than comparison agencies
• Reduction in single family and accessory dwelling units Community Feedback
General concerns about small increases on trade permits 14 Building
15 Recommendation
• Add minimum fee for plan check and inspection (increase) • Add ”standard” category for demolition permits (reduction – new fee at full cost)
• Allow light pole plan check and inspection to apply to batches of 10 poles (reduction – process improvement)
• Add separate fee for commercial exhaust hoods (increase – new fee at full cost)
15 Technology and Planning Surcharge
16 Planning Surcharge
• 12.65% of fees paid on planning and non-trade building • Provides financial support to preparation of advance planning initiatives such as General Plan, Housing Element and Zoning Code updates Technology Surcharge
• 5.69% of building, planning and engineering fees
• Support to technological solutions (hardware and software) utilized in the permitting, plan review and inspection processes
Staff Recommendation
• Add a maximum amount (cap) on an individual applications 16 City Attorney Review
17 • City Attorney’s Office (CAO) provides legal review and advice for the majority of private development projects that require a discretionary action • Certain private development projects require significant legal resources • CAO’s staff time has historically not been included in PED fee structure • Legal landscape for private development is constantly changing and becoming more complex as dozens of new bills are passed each year
• Need exists for additional legal resources to provide legal review and advice within specified timelines
• Many cities, including surrounding jurisdictions, hire outside counsel for private development projects at developer’s cost
17 City Attorney Review (continued)
18 • Larger complex private development projects generate the need for legal review and divert limited City legal resources from other City priorities while providing considerable individual benefits to developers
Recommendation
• Explore options for imposing cost of outside legal counsel on developers for certain categories of private development projects that require considerable legal resources and provide primarily individual benefits
18 Questions and Feedback
Gabe Osburn
Planning and Economic Development Director
[email protected]
19