Loading...
HomeMy WebLinkAbout05-21-2013 c7 appropriate unbudgeted permit revenue to allow development related servicescounctL âqenòâ RepoRt 14eeling DaLe s12|13 Item Nu'¡bec 7 CITY OF SAN LUIS OBISPO FROM:Wayne Padilla, Interim Finance Director Derek Johnson, Community Development Director SUBJECT:APPROPRIATE UNBUDGETED PERMIT REVENUE TO ALLOV/ FOR DEVELOPMENT RELATED SERVICES RECOMMENDATION Adopt a Resolution appropriating $100,000 of excess, unbudgeted revenues from development fees for use in paying contract plan check and temporary contract assistance or temporary staff ("Development Related Services") in order to meet development review deadlines. DISCUSSION Background The purpose of this item is to allocate $100,000 of unanticipated development fees that exceed currently budgeted revenues. The attached resolution will provide for the appropriation of these unanticipated and unbudgeted revenues to retain Development Related Services when permit activity outstrips the capacity of City staff to timely process permit applications. This report provides the background for why the appropriation is needed, the linkage to the recently completed organizational assessment and how this appropriation ties to the adopted Economic Development Strategic Plan. The proposed appropriation is also linked to the 2013-2015 Major City Goals of Economic Development and Fiscal Health. This past fall, the City hired Beacon Economics to prepare a forecast of permit activity associated with new projects in the City. Their conclusion was that development activity in the City of San Luis Obispo had bottomed out, and was on an upward trend. This forecast was validated following the report with the reemergence of permit activity that is currently exceeding or trending towards exceeding five year averages. Attachment 1 provides a summary of permit activity over the last five years for fire, building, planning, and engineering and projected over the next financial plan. Beacon Economics' forecast was cautiously optimistic and assumed that the City had seen the worst declines in permitting activity. V/ith virlually every economic indicator trending upward, they concluded that it was only a manner of time before new construction began with earnest. Thus, anticipating the ramping up in activity, which has already emerged this year with some visible projectsr, staff is proposing that the City Council appropriate $100,000 in unbudgeted revenues for Development Related Services for use when permit activity exceeds resource levels. This request applies to Development Related Services in Fire, Public 'Works and Community Development Departments. I SESLOC, Mind Body, Serra Meadows, Chinatown, Digital'West, and Garden Street Terraces projects to name a few c7 -1 Allocate Unbudgeted Development Services Revenue Page2 Fiscal year 2012-13 has shown strong permitting activity already surpassing total permit valuation and application levels for 2011-I2. Attachment 1 shows permit activity for Fire, Public Works, Building and Planning over the last five years and projected over the next financial planning period. Attachment 1 shows that Planning and Public Works Engineering reduced stafhng to account for the reduction in permit activity. Fire and Building did not make staffing adjustments as the decrease in permit activity did not allow for a full reduction in staffing. In the case of building, although revenue went down, there ìwas a marginal decrease in building activity and hence staff was not reduced. Staff has proposed the same staffrng levels in each of the four divisions over the next financial planning period. This is because 1) development is unpredictable, 2) additional staff is costly, 3) revenues were conservatively estimated to account for the unpredictable nature of development and could not justify additional staff, and 4) adding temporary contract staff or using subject matter experts for Development Related Services can be utilized or remain idle depending on the level of permit activity and not burden the City with ongoing staffing costs in down times. Revenues have increased due to the current level of permit activity and the currently anticipated revenues are forecast to exceed the currently budgeted development fee revenues for this Fiscal Year. Attachment 4 shows the adopted revenue budgets and the actual revenues received for each permit activity as of May 1't. The table shows the amount of over-realizedrevenue as of May l't and projected to June 30, 2013. In the current fiscal year, revenues are currently exceeding the adjusted mid-year budget by approximately $188,000 and are projected to be more than $200,000 over budget on June 30,2013. While the projection shows that revenue will significantly exceed the adopted budgeted amounts, staff is recommending less than the full amount should any significant drop in revenue occur over the next six weeks. Fees The cost of providing service is calculated by reviewing expected costs and estimated time to provide the requested service. Determining a target level of cost recovery involves agency specific decisions. As long as the adopted fee is set at an amount that does not exceed the estimated reasonable cost of providing the service or activity, the City will remain in compliance with legal requirements. The City currently meets these requirements and the proposed policy will strengthen the relationship between fees paid and services rendered. The City's adopted policy is that development should fully cover ihe costs for permitting services.2 This General Plan policy is implemented through City Budget and Fiscal Policies on User Fee Cost Recovery Goals or Development Review Programs which states that cost recovery for these services should in most instances be 100%. The current fee schedule was established to recover rc}% of staff time spent reviewing building, planning, engineering, and fire permit applications. The City is currently working to update the Master Fee Schedule. Updating fees every five years is a best practice and ensures that there continues to be a direct relationship between the time spent on a service and the fee. This is a basic requirement under the 1aw3 to ensure that fees for services do 2 General Plan Policy I . I 3 indicates that the costs of public facilities and services needed for new development shall be bome by the new development, unless the community chooses to help pay the costs for a certain development to obtain community-wide benefi ts. ' Article XI of the California Constitution. c7 -2 Allocate Unbudgeted I)evelopment Services Revenue Page 3 not undercharge or overcharge and hence become a tax. A revised fee schedule for Parks and Recreation, Police, Fire, Engineering, and Planning will be presented to the City Council in early 2014. While new fees will ensure that cost recovery is occurring consistent with established policy, any change in fees will not address the amount of available resources needed to service permits during periods of permit activity that exceed currently available staffing and other resources. O r ganizatio n al As s es s ment The recently completed organizational assessment provided over 80 recommendations. One of the ten strategic recommendations is to develop an approach to administer revenue derived from permit activity so that resources are readily available to tackle periods when permit activity exceed available resources and quickly shed unneeded resources when development activity slows. The exact language from the assessment is as follows: Establish a Development Services Fund, or compqrable accounting device, that will allow the Department to appropriately manage resources during peak and non-peak development activity periods. The cyclical nature of development is not a unique phenomenon to the City of San Luis Obispo. Every jurisdiction experiences the ebb and flow of development. These cycles are less pronounced in the City of San Luis Obispo which has had an evenly distributed housing and non-housing development rate. One approach to compensate between the time that services are delivered and the period in which planning, building, fire, and engineering permit fees are collected is through the establishment of a Development Services Fund. This approach is commonly used in larger organizations where large fluctuations in development activity can cause significant swings in permit revenues and cost centers. Staff is not recommending the establishment of a full Development Services Fund at this time. The reasons are that assigning the full costs (i.e. direct, indirect, and overhead) for processing applications is challenging to establish and once established is time consuming to administer. Moreover, the process of establishing and maintaining a separate Development Services Fund would likely add administrative costs to the development review process. Lastly, development services fees make up 3.4% of the overall General Fund revenues and establishing and maintaining a separate fund to account and track these funds would likely not be worth the time and effort. Staff intends on returning to the City Council to propose a financial policy when it has been fully vetted to create a Development Services Revolving Account to fund development related services when permit activity outstrips available resources. In the short term, staff recommends that the City Council adopt a Resolution (Attachment 2) to allocate $ 100,000 of the estimated $210,246 in excess permit revenues to be used for development related services as set forth in the Resolution. Economic Development Strategy The proposed reallocation of excess revenue ties to the Economic Development Strategic Plan that identified a goal of reducing permit processing times as one of the key strategies to creating Head of c7 -3 Allocate Unbudgeted Development Services Revenue Page 4 Household jobsa. This goal identifies 10 different strategies to achieve this goal; the majority of these are process changes rather than a shift in policies. The main goal nonetheless is to reduce processing times while also ensuring compliance with adopted policies, regulations, and development standards. The staffrng levels of the Community Development Department, Fire, and Public 'Works are oriented towards servicing regular permit activity rather than staffing to the peak. Staffing to peak permit activity would result in the inefficient use of resources during periods of normal or below normal permit activity. Attachment 1 shows the amount of planning applications and building valuation over the past five years and compares it to existing and projected activity. The graphs also show the amounts of employees dedicated to the direct processing of permits in Fire, Public Works, Planning, and Building. These graphs show that projected permit activity is on the cusp or will soon likely outstrip current resources, particularly in the Planning and Building Divisions, which would result in delays in permit processing. Attachment 1 illustrates general indicators of permit activity. Currently, when permit activities substantially increase, the department does not have an immediate mechanism to access financial sources to retain additional resources to meet cycle times and/or shorten processing time for high priority projects. The proposed reallocation of excess revenue would be allow staff to bring on additional resouÍces to meet or exceed permit processing times. Companion RFP's Two RFP's are also on the agenda to retain outside "on-call" consulting firms to assist with building and planning plan check and inspections. These firms would only be used when existing staff resources cannot meet cycle times and only when there are adequate balances in the Development Services Account. Staff will be crafting RFP's for plan check services for Fire and Public 'Works over the next few months so that these departments also have on-call resources during peak permit activity. CONCURRENCES Fire, Public 'Works, Utilities, and the Community Development Departments all support the proposed reallocation of funding to provide immediate funding to process permit applications when volumes exceed available resources. FISCAL IMPACT There is no impact to the General Fund as permit revenues are projected to exceed budgeted amount by approximately $210,000 on June 30,2013. The proposed appropriation of $100,000 would be offset by an equal increase to the Community Development revenue accounts. These monies would only be used for plan check and inspection services or temporary contract help on an as-needed basis. In the event that the actual revenues realized fall short of the budgeted amount, any portion of the def,rciency will be removed from the expense budget at June 30th since it is unlikely that the contracts with outside seruice providers willlead to a significant expenditure of these monies before that time. 4 1.1 Identi¡, opportunities for permit streamlining with the goal of reducing permit processing times, seeking opportunities to increase internal coordination, and improving cross department focus on development review c7 -4 Allocate Unbudgeted Development Services Revenue Page 5 ALTERNATIVES The City Council could choose to deny the proposed appropriation and approach to addressing this increase in service demands. Staff does not recommend this alternative as current staffing levels budgeted in the current and next fiscal years will at times not be suffrcient to timely process permit applications without additional outside resources. This would cause delays in permit processing which would delay beneficial economic activities associated with projects. ATTACHMENT 1. Five-Year Planning, Fire, Engineering, and Building Permit Activity 2. Unbudgeted Appropriation and Allocation of Revenues from Permit Fees Resolution 3. Permit Processing Cycle Times 4. Development Services Revenue Projections c7 -5 Attachment 1 To t a l Bu i l d i n g Pe r m i t s s5 0 50 0 45 0 7 6 5 6 .Ë E oô. 4 Èoc (! tn d¡ T o t a l Building Permits *s t a f f i n g -T r e n d l i n e 3 40 0 2 35 0 t 30 0 0 20 0 8 - 2 0 0 9 20 0 9 - 2 0 t o 20 1 0 - 2 0 7 1 20 L 7 - 2 0 L 2 Fi s c a l Ye a r 20 7 2 - 2 0 L 3 * 20 ! 3 - 2 0 t 4 20 1 , 4 - 2 0 1 5 at \ .8 44 t 45 4 46 2 43 8 7C To t a l ln s p e c t i o n s 15 , 0 0 0 14 , 0 0 0 13 , 0 0 0 !2 , 0 0 0 1L , 0 0 0 10 , 0 0 0 9, 0 0 0 8, 0 0 0 7, O O O 6, 0 0 0 7 6 5 6 =o o CL 6tr 4 bocç(E tt , rÈTotal lnspections *staffing -Trendline 3 2 1-0 20 0 8 - 2 0 0 9 20 0 9 - 2 0 1 0 20 r o - 2 0 1 - t 20 7 L - 2 0 L 2 20 7 2 - 2 0 1 , 3 " Fi s c a l Ye a r 20 1 3 - 2 0 7 4 20 1 4 - 2 0 L 5 - / / \ .ç 10 , 3 7 \ _1 - ? Á V 9, 9 4 7 1U 5 l b 1 \r ' 8, 3 7 6 c7 -7 To t a l Pl a n n i n g Ap p l i c a t i o n s Re c e i v e d 23 0 22 0 zt o 20 0 19 0 18 0 L7 0 16 0 15 0 7 6 5 6co .! .9 CL CL òo .s =cr!d 4 ¡o I To t a l Planning Applications 3 r!vl Re c e i v e d *S t a f f i n g -T r e n d l i n e 2 1 0 20 0 8 - 2 0 0 9 20 0 9 - 2 0 1 0 20 t o - 2 0 7 L 20 L L - 2 0 t 2 Fi s c a l Ye a r 20 L 2 - 2 0 1 3 * 20 7 3 - 2 0 L 4 20 1 4 - 2 0 t 5 2L 3 ç I 12 2 2 \ 5 5 ç t7 9 6 IC To t a l Fi r e De p a r t m e n t Pe r m i t / P l a n Re v i e w s 26 0 24 0 22 0 20 0 18 0 16 0 t4 0 t2 0 L0 0 2 1. 5 q 3o o É,cl!ô- .Ë ELoo- àoÊ fU 1t ' r{ n f e t ¿ l Fire Department Permit/Plan Reviews 1, *S t a f f i n g - Trendline 0. 5 0 20 0 8 - 2 0 0 9 20 0 9 - 2 0 L O 20 t O - 2 0 L 1 . 20 t L - 2 0 L 2 20 L 2 - 2 0 1 3 * 20 1 3 - 2 0 1 , 4 20 ! 4 - 2 0 L 5 Fi s c a l Ye a r 19 6 rr à r / r IF F tà , / I; -f t t / 1. 1 l_ . r l_ . r I. I ,r 1q , I. J. -t . 1 23 8 úO 22 2 22 4 { c7 -9 To t a l Va l u a t i o n s S+ s , o o o , o o o 10 9 8 7 6 o t!¿o 5 òoc rt - lE tt t *nTotal Valuations OStaffing - Trendline s3 0 , 0 0 0 , 0 0 0 4 3 S2 5 , o o o , o o o 2 t S2 o , o o o , o o o 0 20 0 8 - 2 0 0 9 20 0 9 - 2 0 1 0 20 t o - 2 0 1 1 20 t t - 2 0 t 2 20 1 , 2 - 2 0 L 3 * 20 7 3 - 2 0 1 4 20 t 4 - 2 0 L 5 Fi s c a l Ye a r 5. 8 5. 8 53 3 , 4 0 7 , 6 t e 5. 8 5. 8 St s , a n , z z z I I 5. 8 s4 1 , 8 s 7 , 3 s 0 S3 9 , 5 4 8 , 7 5 8 54 2 , 2 2 9 , 5 9 L î 5. 8 53 3 , 9 1 8 , 1 6 3 5. 8 Þz ð Y ' 5 4 1 C7 Attachment 2 RESOLUTTON NO. (2013) A RESOLUTION OF THE CITY OF SAN LUIS OBISPO AMENDING THE GENERAL FUND BUDGET FOR THE PURPOSE OF APPROPRIATING AND ALLOCATING DEVELOPMENT FEE REVENUES THAT EXCEED THE CURRENT BUDGET TO PROVIDE THE RESOURCES NEEDED TO PAY FOR DEVELOPMENT SERVICES \ryHEREAS, the City Council adopted the annual budget of the General Fund on June 19,2012 setting forth the revenues and appropriations for the 2012-13 Fiscal Year; and WHEREAS, the City's Budget and Fiscal Policies call for periodic reviews of the city's financial status no less than semi-annually; and WHEREAS, staff has confirmed that fees charged by the Community Development Department will exceed the currently budgeted amounts by at least $100,000; and WHEREAS, the excess fees represent demand from the development community for services which the Community Development Department must secure through the use of outside contracts in order to provide timely services in accordance with the Economic Strategic Plan; and \ryHEREAS, the current appropriations within the Community Development Department are not sufficient to provide the resources to fund the required outside contracts referred to above and a budget amendment as shown in Exhibit A, which is incorporated by reference herein is required. NO\ry, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo hereby finds and directs the following actions: SECTION 1. The above recitals are true and correct. SECTION 2. The General Fund budget shall be amended as shown in Exhibit A to this resolution. SECTION 3. The Interim Finance Director/Treasurer shall take all actions necessary to record the budget amendment within the financial records of the city. SECTION 4. The Community Development Director shall secure the required outside contracts or temporary staffing resources as needed to provide the services for which fees have been collected in accordance with City contracting policies and procedures. SECTION 5. In the event that the estimated revenues are not realized in the amount reflected in Exhibit A, the Interim Finance Director/Treasurer shall reduce the amount appropriated in accordance with this resolution by the amount of revenues that are not realized at June 30,2013. R c7 -11 Resolution No. _ (20xx Series) Page2 *{<***********{<** Upon motion of , seconded by and on the following ro11 call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this 2l't day of May 2013. Mayor Jan Marx ATTEST: Maeve Kennedy Grimes City Clerk APPROVED AS TO FORM: J. Christine Dietrick City Attorney c7-12 Resolution No._ (20xx Series) Page 3 Fund - General Fund Increase/(Decrease) $ 25,000.00 $ 75,000.00 $100,000.00 Exhibit A Revenue 45480 - 45490 - Planning and Zoning Fees Building Permits Expense 40100 -7227 Contract Services c7 -13 Pland¡g (from "deemed complete" date) 40Lot Line Adjustment 80-120Tract Map 40-50Minor Sub Dir. Action 20-30 Admin UP 30-40 20-40ARC Minor lncidental 40-60ARC 40-60Conceptual ARC PC Use Permit 40-60 Mills Act 30-40 Siens 20-40 120-240GPA 120-180Rezone Specific Plan Amend 1_20-180 Variance 20-40 PLANNTNG/BUTLDTNG CYCLE TIMES Attachment 3 lnitialReview RecheckResidential 20 10Minor 10Moderate20 10Major20 Commercial Minor 20 10 30 15Moderate 40 20Major RechecklnitialReview Fire & Life Safety 15 10 Fire Protection 15 10 r¡ ,{. lì ,ìri:I i iJttl ìiì¡ìt,':t ¡[:]\f/ ,, lnitialReview Recheck 20 L0 Lot Line Adjustment or Certificate r, !\ ,i.,ri::ì{í ii,1r"rr r''ì irjil.l t,). rri"r'l c7-14 MS Map Review 30 15 MS PIP Review 30 15 Tract Map < 50 lots*40 20 Tract PIP's < 50 lots*40 20 Add time/50 lots 10 5 Encroachments Minor L0 5 Moderate 20 10 Major 30 15 Misc PIP's Minor 20 L0 Moderate 30 15 Major 40 20 Traffic Plan Review Moderate 10 5 Maior 15 L0 Attachment 3 c7 -15 A Ci t y of Sa n Lu i s Ob i s p o De v e l o p m e n t Re v i e w 20 1 2 - 1 3 Re v e n u e s c Attachment 4 (Ð = Re v i s e d re v m 0 e s ft o m th e 20 1 2 - ' 1 3 Mi d - Y æ r Bu d q e t Re p o r t (B ) = Ac t u a l re v s u e s as of 5t ' 1 t 2 0 ' t 3 (c ) = AJ l 2 x l o - e (D ) = B/ 1 0 x 1 2 (E) = o-nt Un b a d g e t e d Revenues (6/s0/1s)$80,554 $116,737 s6r,464 -$33,262 Pr o j e c t e d Re v e n a e s (6 ß 0 / 1 s ) $5 8 0 , 4 5 4 $1 , 2 2 r , 3 3 7 $2 1 1 , 4 6 4 $5 3 1 , 7 3 8 Un h u d g e t e d Re v e n u e s (5 n / ß ) $6 7 , 1 2 9 s9 7 , 2 8 r s5 1 , 2 2 0 -s 2 7 , 7 1 8 $4 8 3 , 7 1 2 $1 , 0 1 7 , 7 8 1 st 7 6 , 2 2 0 $4 4 3 , 1 15 Ac t u a l Re v e n u e s (s / I / 1 3 ) $4 9 9 , 9 0 0 $1 , 1 0 4 , 6 0 0 $1 5 0 , 0 0 0 $5 6 5 , 0 0 0 Re v i s e d Re v e n u e s (M í d - Y e ø r ) 20 1 2 - 2 0 1 3 Pl a n n i n g Bu i l d i n g Fi r e PW En e . I ) e v . Re v . C7 MAY 2I 2OI3 R ÏVED L[rRIcounctl memopânò May 21,2013 TO: City Council FROM: Derek Johnson, Community Development Director VIA:Katie Lichtig, City SUBJECT: Agenda Item C7 - Appropriation of Excess Unbudgeted Revenues from Development Fees This Council Correspondence file addresses a request for clarification regarding the proposed appropriation of excess unbudgeted revenues of development fees. Question L: On the charts, does the 5.8 staffing level include those individuals who are currently being compensated through developer payments (vis a vis Chevron)? The 5.8 FTE shown on page C7-6 presents the total number of Building and Safety Division staff dedicated to the review of plans and inspection of censtruction projects. The 5.8 FTE listed are funded by fees for service, meaning that building permit and plan check fees that are collected and deposited in revenue accounts are intended to cover the City's costs to review plans and inspect projects. The amount of staff authorized in Development Review Division for the review of planning applications is 4.0 FTE. The chart does not show temporary positions. The chart shown on Page C7-8 shows the amount of the planning applications and FTE over the past five years and projected over the 2013-2015 Financial Plan. An additional 0.5 FTE temporary Planner Tech position was filled to cover counter activities to account for the shift in authorized staff to provide special project management services to the Chevron Tank Farm Project. The 0.5 FTE will only be available until the EIR is presented to Council in fall 2013. The 0.5 FTE is only temporary and will not be available during the next financial planning period when permit activity is likely to increase and at times exceed available staff resources. Question 2: To what extent has development in the newly annexed Orcutt area and the upcoming projects re: Chevron, Margaritan Prado and the Airport Area were included in your projections? Planning and building plan activity is irregular and unpredictable. The conservative assumptions that built the projections of building, planning, and fire permit activity as shown in the attachments for item C-7 over the next two years were based on Beacon Economics' forecast. This forecast called for total growth of 20-30% in permit activity through 2017-2018. It is projected that there will be approximately 32% compound growth in permit activity over the next two years, with activity ramping up in the last three years of the five year forecast. Growth C-7 Council Correspondence-Appropriation of Excess Unbudgeted Permit Revenue Page 2 is already picking up with virtually all permitting and inspection activity at or near levels seen in the 2008-2009 Fiscal Year. The majqrity of significant development projects are occurring in the City's specific plan areas which include properties in the Margarita, Orcutt and Airport Areas. Question 3: It appears that the Fire permit/plan reviews are in excess of planning applications. Please explain. There is a partial correlation between the number of planning applications and fire permit/plan review. The volume of planning applications shown on Page C7-8 presents all ministerial and discretionary reviews over the past five years and projected for the two years covering the 2013- 2015 Financial Plan. Not all planning applications are reviewed by the Fire Department. The Fire Department reviews some but not all planning and building permits. The projected planning and fire application and review volumes are similar, but there is not an absolute correlation between the two. For example, a sign permit is reviewed by Development Review Planning Division (i.e. planning) and by the Building and Safety Division, but will not be reviewed by the Fire Department. Some tenant improvements require only building permits and review from the Fire Department and will not require planning permits. The difference in permit volumes is'not uncommon and reflects the complex planning and building review process that is established by the International Building Code and locally adopted land use policies and development standards. Please contact Derek Johnson at 805-781-7187 should there be any questions, tr\@unc¡l agenda reportsU0l3\2013-05-21\sllocgte development review revenue (padilla-johnson)ogendo conespondence-c-7 docx