Title
Public Hearing to Consider Adoption of Resolution Amending Master Fee Resolution No. 12191 to Add New and to Revise Existing Planning, Building and Public Works Fees. (Building 481001 and Public Works 4210310)
Body
To: Honorable Mayor and Members of the City Council
From: Amy Wooldridge, Interim City Manager
EXECUTIVE SUMMARY
The City of Alameda (City) contracted with NBS Government Finance Group, Inc. (NBS) to conduct a detailed cost of services study of user fee activities for the Planning, Building and Transportation Department and the Public Works Department. The primary purpose for conducting this study was to ensure that existing fees, which were adopted in 2013, do not exceed the costs of service and to provide an opportunity for the City to adjust fees to better align them with the adopted cost recovery policies.
The cost of service analysis of Planning, Building and Transportation Department and the Public Works Department services indicates that fees currently being charged are not adequate to capture the actual costs of the services provided. In response, the Planning, Building and Transportation Department and the Public Works Department are recommending that various fees be adjusted to ensure full cost recovery for permit services.
BACKGROUND
California cities are permitted by State law to impose user fees for services and regulatory activities they provide. User fee activities include those services and functions the City provides to individuals who receive a direct or personal material benefit from the services, while regulatory fees are those imposed to recover costs associated with the City's power to govern certain activities such as development and construction. Per State law, fees may not exceed the estimated and reasonable cost of providing the service or performing the activity.
The current Public Works, and Planning, Building and Transportation fees were adopted after preparation of a fee study in 2013. Since 2013, state and local building and zoning code requirements have changed, labor costs have changed, and the types and kinds of improvements and services desired by the Alameda community have changed.
In 2018, the City contracted with NBS to conduct a detailed cost of services study of user fee activities in the Planning, Building and Transportation Department and the Public Works Department. (Exhibit 1.) The primary purposes for conducting this study was to ensure that existing fees do not exceed the costs of service and to provide an opportunity for the City Council to re-align fee amounts with the adopted cost recovery policies.
DISCUSSION
The cost of services study examines all the permit services and fees administered by the Planning, Building and Transportation Department and the Public Works Department. The study provides a cost of service analysis, which evaluates direct and indirect labor costs, specific direct non-labor costs, allocated non-labor costs, and allocated citywide overhead costs. This analysis derives a fully burdened labor rate for the departments.
Organizational and service time analyses were performed for each activity, followed by a cost recovery analysis, which compared the existing fee for each service or activity to the average full cost to provide the service. Finally, the study identifies a fee structure necessary to meet cost recovery targets.
The study found that the fees currently being collected to recover the cost of providing permit services by the Planning, Building and Transportation Department and the Public Works Department do not cover the full costs to the City to provide those services. Currently, Building fees cover approximately 80% of the costs, Planning fees cover approximately 6059% of the costs, and Public Works fees cover approximately 40% of the costs. The table below provides a summary of the existing fee levels and recommended cost recovery fees.
|
Department |
Annual Estimated Revenues at Existing Fee Level |
Existing Cost Recovery Percentage |
Annual Estimated Revenues at Recommended Cost Recovery Fee |
Recommended Cost Recovery Percentage |
|
Planning |
$472,214 |
59% |
$791,076 |
99.7% |
|
Building |
$2,382,353 |
80% |
$2,964,743 |
99.4% |
|
Public Works |
$361,864 |
40% |
$381,676 |
42% |
.
The discrepancy between the current fees and the actual costs may be attributed to a number of factors, including but not limited to: the age of the fees, which were established in 2013; the increasing complexity of state and local regulations that increase the work needed to process permits; and the types of permits and processes desired by Alameda residents, property owners and business owners.
The recommended adjustments and reasonings for each department are described below:
Building Fees: The City’s building fees currently recover approximately 80% of the total cost of providing services. To achieve full cost recovery, the fully burdened hourly rate needs to be $200 per hour. In addition, to better align with current practices and service offerings and improve clarity and transparency for permit applicants, the building fees were adjusted to:
• Simplify the fee structure to create a more user-friendly fee structure for applicants and staff;
• Delete fees that are no longer used or not needed; and
• Add new fee categories for new types of permits or to separate a specific permit type from a larger more general permit category.
Planning Division Fees: Planning entitlement fees currently recover approximately 60% of the total cost of providing planning permit services. To achieve full cost recovery, the fully burdened hourly rate needs to be raised to $216 per hour. In addition, to better align with current practices and service offerings and improve clarity and transparency for permit applicants, the planning fees were adjusted to:
• Simplify the fee structure to create a more user-friendly fee structure for applicants and staff;
• Reflect recent streamlining improvements in planning processes to exempt certain proposals from planning permit requirements or institute on-line permitting;
• Where appropriate, replace deposit based fees, with flat fees, to increase certainty regarding permit costs for applicants and reduce the administrative costs to monitor deposits; and
• Ensure consistency with fee amounts for similar permits from neighboring, similar jurisdictions.
Public Works Fees: Public Works fees currently recover approximately 40% of the total cost of providing services. To achieve full cost recovery, the fully burdened hourly rate needs to be $192 per hour for the Engineering Services Division, $157 per hour for the Storm Drain program and $149 per hour for the Integrated Waste program.
Many of Public Works fees are deposit based fees, or actual cost fees, that appropriately recover the true cost of the associated service. Due to the relatively low number and highly variable nature of engineering projects, the recommended deposit levels presented in this study are set below actual anticipated cost and do not differ significantly from existing levels. However, actual staff time will be recovered using the appropriate fully burdened hourly rate (as stated above) and will result annual cost recovery closer to 100%.
In addition, to better align with current practices and service offerings and improve clarity and transparency for permit applicants, the following changes to the Public Works fees are recommended:
• Restructure the fee schedule for better readability, and to better align with current practices and service offerings;
• Charge flat fees where fee is one-time, fixed amount for service provided;
• Charge an initial deposit amount, then charge for services on an hourly basis against that deposit, for more complex projects;
• Charge hourly rates for Right-of-Way Permits for utility companies such as East Bay Municipal Utility District (EBMUD), AT&T, and Pacific, Gas & Electric (PG&E)
• Explicitly subsidize residential Right-of-Way Permits for concrete and minor encroachment permits to increase the rate of permit issuance and ensure compliance with City standards during construction;
• Group together fees for support of entitlement application review into a single section of the fee table;
• Group together fees for final map review into a single section of the fee table and charge an initial deposit;
• Streamline fee categories for improvements, grading, and demolition project approval and permitting into a single fee structure that scales an initial deposit amount based on the cost of construction for proposed improvements;
• Consolidate the right-of-way permits (encroachment) fee categories into common project types and segregate between minor residential type permits that can be charged on a fixed fee basis versus charged on an initial deposit basis;
• Intentionally set residential right-of-way permit fees below cost to increase the rate of permit issuance and compliance with City Standards during construction;
• Change on a per hour basis for right-of-way permits for utilities, such as EBMUD, AT&T, and PG&E to both simplify the interaction with these companies for whom many permits are issued each year and ensure full cost recovery by the City when providing these services;
• Restructure solid waste and recycling permits / hauling (Construction & Demolition) fees to better align with how services are provided;
• Restructure sewer lateral permit fees to better align with how services are provided;
• Include storm water fees for development related plan review and inspection with the improvement fee categories, above. Separate fees for post-construction regulation and annual inspection into a separate section of the fee table;
• Group other miscellaneous fee items that do not fit into the major categories of fees as described above into a single “miscellaneous” category on the fee list;
• Add new fee categories including: Non-Construction Events, Small Cell Right-of-Way Permit, Floodplain Administrator - Permit Application Review; and
• Delete fees that are no longer used or not needed including DVD/CD copy fees, Arborist Report, etc.
Compliance with Proposition 26: Proposition 26 was adopted by the voters in November 2010 and amended the State Constitution to provide a definition of "tax" for local government purposes. Tax is defined as any levy, charge or exaction of any kind that does not fall within certain enumerated exceptions. As to local governments, any fees and charges subject to Proposition 26 that are newly imposed or increased on or after November 3, 2010, require voter approval.
Staff has reviewed the proposed changes to the fee schedule and concludes the fees fall within various exceptions under Proposition 26. Specifically, the fees and charges are (a) imposed for a specific benefit conferred directly to the payers that is not provided to those not charged and does not exceed the reasonable cost to the local government of conferring the benefit, (b) imposed for a specific government service or product provided directly to the payers that is not provided to those not charged and which does not exceed the reasonable costs of the local government of providing such service or product, (c) imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections and audits, and the administrative enforcement and adjudication thereof, and/or (d) imposed as a condition of property development.
As set forth in great detail in the Comprehensive Fee Study prepared by NBS, there is ample evidence that the fees and charges are not "taxes;" the amount of the fees and charges are no more than what is necessary to cover the cost of the governmental activity (and indeed, in some cases, the fees and charges that the City proposes to impose are less than the reasonable cost that the City incurs to provide the services) and the manner in which the costs are allocated to a payers bears a reasonable relationship to the payer burden on, or benefits received from, the governmental activity.
FINANCIAL IMPACT
Adoption of the recommended amendments to the Master Fee Schedule will ensure at least 99% cost recovery for City Planning, Building and Public Works permit services.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code.
This activity will assist in meeting the goals of the City of Alameda's Local Action Plan for Climate Protection.
ENVIRONMENTAL REVIEW
Adoption of a revised fee schedule is not subject to environmental review in that it is not a "project" as defined by California Environmental Quality Act (CEQA). A "project" does not include the creation of governmental funding mechanisms or other governmental fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA Guidelines, section 15378(b)(4).
RECOMMENDATION
Adopt a Resolution amending Master Fee Resolution No. 12191 to add new and to revise existing Planning, Building and Public Works fees.
Respectfully submitted,
Andrew Thomas, Acting Planning, Building and Transportation Director
Liam Garland, Public Works Director
By,
Gregory McFann, Building Official
Liz Acord, Public Works Coordinator
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit
1. Fee Study
2. FY 18-19 Planning and Building Fees Schedule
3. FY 18-19 Public Works Fees Schedule