Agenda Item AGENDA STAFF REPORT ASR Control 10-000160
MEETING DATE:	03/16/10
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	All Districts
SUBMITTING Agency/Department:	OC Public Works (Approved)
Department contact person(s):	Jess Carbajal (714) 667-3217
	Rick LeFeuvre (714) 955-0124

Subject: Proposed Building and Planning Fee Ordinance

ceo Concur	County Counsel Review		Clerk of the Board
Concur	Approved Ordinance to Form		Public Hearing
			3 Votes Board Majority
Budgeted: No		Current Year Cost: $376,759		Annual Cost: FY 2010-11 $1,049,359
Staffing Impact: No		# of Positions:		Sole Source: N/A
Current Fiscal Year Revenue: N/A
Funding Source: General Fund 080: 100%
Prior Board Action: January 13, 2009; August 4, 2009; September 29, 2009; October 27, 2009; November 24, 2009; December 15, 2009; January 26, 2010

RECOMMENDED ACTION(S):

1.	Find that the subject activity is Statutorily Exempt from the provisions of CEQA pursuant to Section 15273 of the CEQA Guidelines.
2.	Read the title of the proposed Building and Planning Fee Ordinance, Attachment A.
3.	Order further reading of the proposed Building and Planning Fee Ordinance be waived.
4.	Conduct Public Hearing.
5.	Direct Ordinance be placed on the agenda of the next regularly scheduled Board meeting for adoption.
6.	At the next regularly scheduled Board meeting, consider the matter and adopt the proposed Building and Planning Fee Ordinance.
7.	Authorize the Auditor-Controller to establish a budget control within the General Fund to track expenditures and revenue related to the Building & Safety activities.
8.	Direct staff to re-evaluate all fee rates every twelve months as part of OC Public Works annual budget preparation and to return to the Board with adjustments as required.

SUMMARY:

Adoption of the recommended Building and Planning Fee Ordinance will establish new fees, rates, and deposit schedules that include a hybrid of valuation-based fees, flat fees, and actual time and material costs for building and planning services performed by OC Planning staff that are commensurate with industry standards and similar jurisdictions within the region and represent fair, equitable, and reasonable costs for providing services to the public as required by Government Code Section 66014.

BACKGROUND INFORMATION:

The Orange County Office of Performance Audit presented your Board with a Performance Audit of Planning and Development Services on July 28, 2009 per your Board's directive. The Performance Audit recommended the following regarding the Time & Materials Ordinance: 1) Planning and Development Services (PDS) move toward a hybrid charging structure over the next couple of years for building plan checks and inspections. Time and Materials would continue to be used for discretionary planning applications, building plan rechecks, re-inspections, and uniquely complex development; 2) The Fund 113 Reserve would be more efficiently managed if it required only CEO approval rather than Board of Supervisors' approval for using the Reserve. PDS Management must be able to react quickly in response to temporary shortages with sustained shortages being evaluated by the Board of Supervisors; 3) CEO Budget should work with PDS and OC Public Works to determine activities the Board of Supervisors intends to be covered by General Funds and determine the true cost of these services rather than providing an annual allocation including the costs and impacts of pursuing the three options in the Audit Report; and 4) The CEO, in conjunction with OC Public Works Management, should consider the merits of combining Agency 080-8000 and Fund 113 into one General Fund budgetary organization. Such a combination would not preclude efforts to achieve full cost recovery for billable services if an additional General Fund subsidy was not provided.

The Fiscal Year 2009-10 Budget for Building & Safety Fund 113 includes offsetting expenditures in the amount of $7,737,414 with 93% revenue from fees, 6% Beginning Fund Balance, and 1% General Funds. Planning Budget Control Fund 080 includes offsetting expenditures in the amount of $5,315,502 with 44% revenue from fees and 56% General Funds. Collectively, PDS was allocated $3,064,871 in General Funds, which offset approximately 23% of the cost. Other local government jurisdictions have reported that they underwrite their planning land use services by as much as 65% to 70% with General Funds or other funding sources. The budget was also formulated based on a 3.8 overhead multiplier for Building & Safety and a 4.2 overhead multiplier for Planning. The Countywide Cost Allocations Plan (CWCAP) charges were included in Fund 113 Budget in the amount of $300,000. No Reserve drawdown was budgeted.

Per your Board’s directive on August 4, 2009, OC Public Works has worked collaboratively with the CEO and the Board Sub-Committee to develop an alternative fee schedule. OC Public Works selected Management Partners to assist with the formulation of a new fee structure due to their expertise and prior assessment of PDS's operations. In 2006, Management Partners completed a comprehensive review of the Building and Safety Fund 113 and provided an assessment of the organizational and fiscal management system. As such, Management Partners was uniquely qualified to prepare the proposed fee structure.

Management Partners began their work by first reviewing the existing building and planning fee structure extensively and then examined alternative fee approaches with respect to their applicability to the issues raised in the Performance Audit. Management Partners also conducted research and surveyed surrounding cities with similar sized populations regarding their planning fees. Management Partners’ survey of cities in Orange County showed that most cities charge a combination of flat fees for standard safety related permits, actual cost for planning permits, and valuation-based permit fee for more involved building permits. The recommended valuation-based system uses the construction cost data table from the International Code Council, which includes a regional cost modifier for California of 1.12.

The proposed Building and Planning Fee Ordinance for your Board's consideration and adoption includes a hybrid of the variety of fee types. Most of the County’s building permit fees for both residential and commercial would be calculated using the valuation-based system. Flat fees would be charged for safety related and simple ministerial permits and actual costs would be recovered for discretionary development/entitlement and grading permits. The collective composition of all permit fees will include approximately 35% valuation-based fees, 40% flat fees, and 25% actual costs based.

The total permit fee based on the recommended valuation-based system will include an inspection fee, plan check fee, and a flat $15 permit issuance fee. The total project valuation is calculated based on multiplying the project square footage by the industry standard square foot construction cost, which is then multiplied by the regional cost modifier for California. The Valuation Fee Table is applied to the total project valuation amount to calculate the inspection fee. The plan check fee is calculated at 65% of the inspection fee.

Tract home permits involve initial plan check of the model/master home and then subsequent repeat units. The plan check is streamlined after reviewing the model/master home and as such the plan check for the subsequent repeat units is discounted 75%. The inspection fee is also discounted 40% for all units with the flat $15 permit issuance fee charged for each unit.

OC Public Works met with the Building Industry Association (BIA), Development Processing Review Committee (DPRC), and other stakeholder representatives to review the recommended new building and planning fee structure and ordinance. Information was provided regarding the valuation-based system along with peer agency data for large cities within Orange County. Changes to flat fees were also presented, which provided a comparison of the current fees to the proposed new fees that are based on reviewing the average permit cost for the period of January 1, 2007 to October 31, 2009.

The following provides a peer agency comparison of current building permit fees for more involved projects such as room additions, custom single family dwelling, new commercial structure, and tract homes. It is recommended that the County move from its current time and materials structure to valuation-based fees. It should be noted that Orange County serves a larger and more diverse geographic area than any of the cities in Orange County.

Jurisdiction (land area, sq. mi.)	Anaheim (55 sq. mi)	Orange (34.9 sq. mi)	Garden Grove (18 sq. mi)	Costa Mesa (15.9 sq. mi)	Santa Ana (27.2 sq. mi)	OC Current Average T&M Costs (277.5 sq. mi.)	Proposed Permit Costs based on Valuation
First floor room addition, 750 sq. ft, $83,118 valuation	$1,251	$1,089	$1,560	$1,513	$2,560	$3,650	$1,764
Custom, Single Family Dwelling, 3,000 sq. ft., $332,472 valuation	$3,773	$3,374	$4,231	$4,255	$4,773	$5,700	$5125
New Commercial Structure, Merchant Building, 30,000 sq. ft., $3,890,880 valuation	$16,726	$19,628	$25,354	$25,471	$21,178	$20,200	$21,113

a.	Amounts include plan check and inspection fees only
b.	Average permit costs for period 1/1/2007 – 10/31/2009
c.	Peer agency data are current estimates as reported by staff for 2009/2010
d.	Garden Grove and Costa Mesa valuation-based costs are calculated with plan check fees charged as 65% of the Inspection Fee
e.	Plan check fees for the recommended County valuation-based cost are calculated as 65% of the Inspection Fee

Tract Home Cost Comparison

Type	Total Current T&M Cost per Tract Home	Total per Tract Home Cost Based On Valuation
Tract Home 3,000 sq. ft., $332,472 valuation	$2,513.40	$2,469.52

a.	Amounts include inspection fees and plan check fees only
b.	Plan check fees for the recommended County valuation-based cost are calculated as 65% of the Inspection Fee for the master and discounted by 75% for repeat plan check and 40% for the inspection fee.

The following highlights the comparison of building and miscellaneous permit fees currently charged based on the current time and material cost structure and the proposed new flat fees. With the new fee schedule, permit applicants will be provided a definitive cost at the beginning of the process for these safety related and improvement projects rather than be subject to open ended actual time and material costs.

Permit Type (Proposed)	Current Fee Type		Average Current Fee	Proposed Fee Type		Proposed Fee
BUILDING PERMITS
Demolition		T&M	$450		Flat Fee	$450
Electrical		T&M	$304		Flat Fee	$250
Light Pole Footings, per Pole		T&M	$343		Fixed Rate	$300/Pole
Landscape Plan Review		T&M	$1,986		Flat Fee	$1,000
Mechanical		T&M	$332		Flat Fee	$200
Occupancy Only - No Alterations		T&M	$831		Flat Fee	$500
Patio, Standard: Covers, Decks, Balconies, Enclosures		T&M	$1,118		Flat Fee	$500
Plastering		T&M	$866		Flat Fee	$450
Plumbing		T&M	$468		Flat Fee	$250
Pool/Spa - Replaster		T&M	$1,000		Flat Fee	$1,000
Reroofing		T&M	$320		Flat Fee	$300
Reroofing - For each detached garage or structure with the main reroofing permit		T&M	n/a		Flat Fee	$200
Sign, Illuminated		T&M	$477		Flat Fee	$400
Sign, Non-illuminated		T&M	n/a		Flat Fee	$200
Skylights, Windows, Doors - Non-Structural		T&M	$400		Flat Fee	$400
Solar Permit		T&M	**$990		-	**waived
Temporary Certificate of Occupancy (each)		T&M	$250		Flat Fee	$150
Temporary Tent Structures		T&M	$500		Flat Fee	$500
Trash Enclosure		T&M	$2,402		Flat Fee	$500
MISCELLANEOUS
Oil Well: Annual Inspection (1st Well)		Flat Fee	$36		Flat Fee	$165
Oil Well: Annual Inspection - each additional well		Flat Fee	$36		Flat Fee	$55
Oil Well: Drilling		Flat Fee	$345		Flat Fee	$600
Oil Well: Re-drilling		Flat Fee	$36		Flat Fee	$300
Temporary Use and Special Events		T&M	$1,300		Flat Fee	$1,500

a.	Flat fees were calculated based on the estimated number of inspections required for each permit and the average permit costs are for period 1/1/2007 – 10/31/2009
b.	**Solar Permit fees are waived until June 2013, per Board of Supervisors’ action dated August 2008
c.	Temporary use and Special Events fee includes structural review and weekend inspections
d.	Plumbing, Mechanical and Electrical permits have a separate fee table
e.	Oil Well Inspection Fee includes inspection and travel time for the initial well and an average of three inspections per hour of additional wells
f.	Oil Well Drilling Fee includes inspection, processing and bond review.

Oil Well fees are recommended to increase in accordance with the Performance Audit recommendation to review and revise the oil well inspection fee to appropriately cover the cost of performing this mandated inspection, per the Board policy of full cost recovery. The Audit recommended that if the fee cannot be adjusted, PDS should pursue General Fund revenue to support this Countywide public safety responsibility.

The recommended fee structure ordinance includes a revised Building and Planning Rate Table; Building, Grading, and Planning Deposit; and Fee Schedules. For Building Permits, the proposed fee structure provides for valuation-based fees for the majority of permits to be issued in accordance with industry standards. Safety related and ministerial permit fees not covered by the valuation approach would be based on established flat fees. Actual time and material costs would continue to be recovered for discretionary development/entitlement and grading permits.

As part of developing the proposed fee structure, OC Public Works and Management Partners established benchmarks to track processing times for building and planning permits. OC Public Works will use performance measurement data to confirm the appropriateness of the established benchmarks and the related fees. OC Public Works will conduct a comprehensive evaluation of the fee rates every twelve (12) months as part of its annual budget preparation and return to your Board with adjustments as may be required. Additionally, OC Public Works will continue to work with the building industry through the Development Processing Review Committee (DPRC) and the Building Industry Association of Orange County (BIA) as part of the annual fee review process.

The proposed fee ordinance also authorizes the OC Public Works Director to accept a 25% discounted deposit for discretionary development/entitlement permits that do not require a public hearing and are projects that have been determined to be exempt from California Environmental Quality Act (CEQA) or have been covered by previous environmental approval. Additionally, fee waivers may be granted by your Board pursuant to resolution or by the OC Public Works Director or designee for emergencies related to natural or man-made disasters as determined by your Board and special circumstances related to a primary residence that has been determined to be uninhabitable and without such waiver would cause extreme hardship only, with ten (10) days written notice to the Supervisorial District Office in which the project is located including the circumstances of such disaster or special circumstances.

The Fiscal Year 2009-10 Projections for Building & Safety Fund 113 is projected to have a deficit of $405,909 by the year end. Expenditures have been reduced to $4,936,542 and will be offset with 80% revenue from fees, 10% Beginning Fund Balance, 8% Use of Reserves, and 2% General Funds. The Countywide Cost Allocations Plan (CWCAP) charges were included in Fund 113 in the amount of $420,000. Fund 113 will require a $835,422 reserve drawdown for FY 2009-10. Planning Budget Control Fund 080 includes offsetting expenditures in the amount of $4,740,879 with 32% revenue from fees and 68% General Funds, a 12% increase, $376,759, as compared to the FY 2009-10 budgeted amount. Collectively, PDS is projected to spend $3,292,586 in General Funds, which offset approximately 34% of the cost and represents a 11% increase in funding as compared to the budgeted amount in contrast to other jurisdictions that underwrite land use planning by as much as 65% to 70% with General Fund or other funding sources. The first ten months of projected revenue is formulated based on a 3.8 overhead multiplier for Building & Safety and a 4.2 overhead multiplier for Planning. The last two month of projected revenue is formulated based on the hybrid fee structure for Building & Safety and a 3.0 overhead multiplier for Planning.

In response to the Performance Audit recommendations regarding the need to determine the base level of staffing needed to ensure an acceptable level of customer service and ensure that a Building Official is available on a full-time basis in the appropriate organizational capacity to establish, direct, and enforce all provisions of the building codes and County Ordinances, five positions are proposed to be filled, which include four customer service and permit intake positions with an annual cost of $377,152 and one code enforcement position with an annual cost of $69,588. Four current and advanced planning positions with a cost of $373,050 are also being filled to support compliance with regulatory requirements. Filling these positions will strengthen core staffing levels, which are currently below the minimum service level recommended in the Performance Audit. These positions are necessary to fulfill in handling general plan maintenance, zoning code amendments, Regional Housing Needs Assessment (RHNA), and Regionwide Strategy compliance, as well as coordinating with the Southern California Association of Governments (SCAG) and the Orange County Council of Governments (OCCOG) to respond effectively to regulatory mandates. OC Public Works will continue to evaluate the need to fill vacant positions on a case-by-case basis to minimize the reliance on the County General Fund.

As a result of implementing the recommended revised fee structure, the annual Building & Safety Budget Control Fund 113 expenditures will be approximately $4,336,542, which is projected to be offset by 96% revenue from fees, 2% Beginning Fund Balance, and 2% General Funds. The Countywide Cost Allocations Plan (CWCAP) charges of $420,000 will not be included in the Building & Safety Fund 113 and no reserve drawdown is projected at this time. The annual Planning Control Fund 080 expenditures will be approximately $5,287,406, which is projected to be offset by 27% revenue from fees and 73% General Fund, a 17% increase, $1,049,359, as compared to the FY 2009-10 budgeted amount. Collectively, PDS will be allocated $3,965,186 in General Funds, which offset approximately 41% of the cost and represents an increase of 18% as compared to the FY 2009-10 budgeted amount. The annual budget structure is based on the hybrid fee structure for Building & Safety and a 3.0 overhead multiplier for Planning.

Compliance with CEQA: The subject activity is Statutorily Exempt from the provisions of CEQA pursuant to Section 15273 of the CEQA Guidelines.

FINANCIAL IMPACT:

Building & Safety Fund:

FY 2009-10 Building & Safety Fund 113 is projected to have a deficit of $405,909 due to further decline in revenue, the Department is projecting to draw $835,422 from Fund 113 Reserves. At the end of FY 2009-10, the Building & Safety Fund 113 is projected to have $429,513 in Fund Balance Available (FBA) and $383,170 in Reserves (one-month contingency). The Reserves and FBA remaining in Fund 113 will be used to minimize fee increases in future years. OC Public Works is requesting to establish a budget control within the General Fund effective May 1, 2010 and transfer all future Fund 113 activities to the budget control within the General Fund, which will enable OC Public Works to account for the General Fund contribution for the Building & Safety activities. The budget control will ensure that the fee revenues do not exceed the cost of the services for which the fee is charged. Funding Building & Safety activities out of General Fund will save approximately $420,000 to OC Public Works from the Countywide Cost Allocation Plan (CWCAP) charges. The CWCAP charges will be absorbed within the Miscellaneous General Fund Budget controlled by the County Executive Office. The Third Quarterly Budget Augmentation Request (Third QBAR) process will move positions and budget currently in Fund 113 to the budget control within the General Fund.

Planning Fund:

The proposed fee structure and enhanced customer support requires an increase in General Fund or other funding sources in the amount of $376,759 for FY 2009-10 and $1,049,359 for FY 2010-11. The proposed plan assumes filling nine currently vacant positions ($819,790 annual cost) and implementing the proposed fee structure with 3.0 Multiplier ($229,569 annual cost). These nine positions include four ($377,152) for customer service and permit intake, one ($69,588) for code enforcement, and four ($373,050) for current and advance planning. OC Public Works will evaluate the need to fill vacant positions on a case-by-case basis to minimize the reliance on the County General Fund and ensure customer service is improved and the County adheres to all regulatory requirements.

The proposed fee structure will require tracking of the “work in progress” so that a revenue adjustment can be made at fiscal year end for fees received as deposits, but not yet earned as revenue.

Budget Impacts/Actions:

The following budget adjustments will be presented to the Board in FY 2009-10 Third QBAR and FY 2010-11 Augmentation Review process.

Building & Safety Fund 113: Third Quarter Budget Adjustment to reduce Fund 113 Reserves by $835,422 to address the current year shortfall and address funding shortfall for the next fiscal year. Third Quarter Budget Adjustment to establish Appropriation and Revenue Budget for the new Building & Safety General Fund. The General Fund (Miscellaneous Fund 004) will have to absorb $420,000 annual loss of CWCAP revenue because CWCAP will no longer be billable to the Building & Safety General Fund.

Planning Budget Control 080: Third Quarter Budget Adjustment to increase General Fund or other funding sources for Planning in the amount of $376,759 and a FY 2010-11 Augmentation to increase the funding for Planning in the amount of $1,049,359.

The Building & Safety and Planning Funds Financial Review (Exhibit A) provides the summary of FY 2009-10 modified budget as of March 2, 2010; FY 2009-10 projections assuming implementation of the revised fee structure effective May 1, 2010; and full-year projections after the implementation of the proposed fee structure. Exhibit A shows separate financial summaries for: (1) Building & Safety activities currently under Fund 113; and (2) Planning activities under Budget Control 080-8000.

STAFFING IMPACT:

N/A

EXHIBIT(S):

Exhibit A - Building & Safety and Planning Funds Financial Review

ATTACHMENT(S):

Attachment A - Proposed Building and Planning Fee Ordinance