13 Staff Report - Determining Building Permit Fees
DATE: TO: FROM: COUNCIL AGENDA REPORT February 26, 2004 MAYOR AND TOWN COUNCIL DEBRA J. FIGONE, TOWN MANAGER MEETING DATE: 3/1104 ITEM NO. /.3 SUBJECT: . ADOPT RESOLUTION AMENDING THE
TOWN OF LOS GATOS COMPREHENSIVE FEE SCHEDULE ESTABLISHING A MULTIPLIER FORCALCULATINGTHE VALUATION OFBUILDINGCONSTRUCTION WHICH IS USED TO DETERMINE BUILDING PERMIT FEES RECOMMENDATION:
1. Open and hold the public hearing. 2. Close the public hearing. 3. Adopt Resolution amending the Town of Los Gatos Comprehensive Fee Schedule establishing a multiplier for calculating
the valuation of building construction which is used to determine building permit fees. BACKGROUND: In keeping with the Town's financial policies, the development-related services provided
by the Community Development Department are supportedby fees based on the actual costs ofthe services. Community Development Department's objective is to achieve cost recovery. The direction
from the Town Council is for this Department to be self-supporting through the collection of these fees. Planning Fees have been analyzed extensively and have been adjusted to achieve
cost recovery. Building services are supported by fees associated with permits and inspections. At the present time, the General Fund subsidizes the Community Development Department
by approximately $700,000. Overthe last 12 months, staff carefully evaluated the Building Permit Fees and determined that a fee adjustment is required to achieve cost recovery.
Currently, the method of determining the valuation of construction projects is based on the annual valuation data provided in the publication, Building Standards, published by the PREPARED
BY: BUD N. LORtZ' Director of Community Development Reviewed by: £S;lOAssistant Town Manager __Town Attorney __Clerk._---'Finance Community Development Revised: 2/26/04
2:29 pm Reformatted: 5/30/02
PAGE2 . SUBJECT: ADOPT RESOLUTION ESTABLISHING A MULTIPLIER FOR CALCULATING THE VALUATION OF CONSTRUCTION February 26, 2004 International
Conference of Building Officials and by the 1997 Uniform Building Code. A copy of the Building Valuation Data is attached as Attachment 3. For example, at this time the Building Standards
Publication establishes a modifier for the Bay Area of 1.16 which is used to adjust the valuation per square foot for Type V -Wood Frame construction (single family dwelling) from $92.40
pet square foot to $107.18 per square foot. This results in a valuation that is significantly below the actual construction costs for the Los Gatos area. DISCUSSION: The current fee
structure for providing building plan check and inspection services is extracted directly from Uniform Building Codes and valuation estimates published by the International Conference
of Building Officials. The valuation estimates are based on construction costs that cover wide regions of the United States and the valuation estimates established for our region are
not representative of the actual construction costs (residential or commercial) for the Los Gatos area. To obtain a realistic construction valuation for the Los Gatos area, staff conducted
three surveys as follows: 1. Survey of Insurance Companies on building replacement costs. 2. Survey of Contractors on construction costs. . 3. Survey of Towns/Cities on building perinit
fees. The results of the surveys appear on Attachment 2. The survey of insurance companies revealed that insurance companies use a flat rate for determining building replacement costs.
Insurance companies do not designate different costs for different types of buildings. For commercial or residential construction, the value to rebuild is between $200-$250 per square
foot. A wide variety of contractors were contacted and asked how tl1ey have bid construction projects in the Los Gatos area over the past five years. The results showed the low end was
$175 per square foot. Several contractors indicated that their bid price for residential construction was $250 per square foot. One contractor indicated that their bid price for residential
construction has gone as high as $350 per square foot in the Los Gatos area. Numerous cities were surveyed and the survey revealed that virtually none of the cities deterinined building
fees directly from the Building Standards Publication. To achieve cost . recovery, some cities use a valuation modifier to obtain a realistic valuation while others
PAGE 3 MAYORANDTOWNCOUNca SUBJECT: ADOPT RESOLUTION ESTABLISHING A MULTIPLIER FOR CALCULATING THE VALUATION OF BUaDING CONSTRUCTION February 26, 2004 establish a series of administrative
fees. A few cities such Scotts Valley currently use the Building Standards Publication for determining construction valuation but many are in the process of establishing a new fee structure.
The majority of the cities that are similar to Los Gatos use a modifier to establish a construction valuation of anywhere from $150-$300 per square foot. For example, the City of Capitola
has a tiered system of construction modifiers and new construction in the "Depot Hill" and "Jewell Box" areas (high end neighborhoods) result in up to $300.00 per square foot construction
valuation. These two areas are very much like the Town of Los Gatos in terms of the quality of construction and materials. All of the cities contacted acknowledge that the Building Standards
Publication results in construction valuations that are far below the actual construction costs in the Bay Area. To obtain a realistic valuation estimate for our area, it is recommended
that the Town of Los Gatos Comprehensive Fee Schedule be amended to include a valuation factor multiplier of 2.32. The 2.32 multiplier will be used in conjunction with the Building Valuation
on Attachment 3 to detennine the Building Pennit Fee. The use of a valuation factor modifier will cause the valuation calculation to reflect the realistic cost of construction
in Los Gatos and will result in . building pennit fees that will allow for cost recovery for building inspection and plan check services. If a 2.32 multiplier is used to detennine a
Building Pennit Fee, it does not necessarily result in a doubling of the total fee since there are some fees such as Road Impact Fees that are not detennined by building valuation. For
example, a 2,500 square foot Type V-Wood Frame home with a 480 square foot garage, currently produces a total Building Pennit Fee of $8,356.09. That includes all the fees that are collected.
If the 2.32 multiplier is used to determine the construction valuation, it results in a construction valuation of $214.37 per square foot and the total Permit Fee is
$13,474.76. The table below shows how a 2.32 multiplier will affect the total Building Pennit Fee for various types of construction projects. 2003-04 Cost RecolTfIErDrl &pIre Per&plre
Cost Per 1Voe ofConmrlion Feet Foot PernitFees PernitFees - -2,980 $ 92.40 $ 8,356.aJ $ 214.37 $13,474.76 :t".ewRetail Sroce
5,(00 $ 51.60 $ 5,030.96 $ 119.71 $ 8,100.01 It is important to note that the Town of Los Gatos provides an extremely high level of customer service with regard to planning and building
services. For example, the Town is extremely committed to a planning process that involves the community which generates significant public input. Through this process, a projectmay
be approved but often numerous complex conditions of approval are imposed to address neighborhood concerns. Planners must carefully review construction plans to ensure that all conditions
of approval have been satisfied. This is a time
PAGE 4 MAYORANDTOWNCOUNCa SUBJECT: ADOPT RESOLUTION ESTABLISHING A MULTIPLIER FOR CALCULATING THE VALUATION OF BUaDING CONSTRUCTION February 26, 2004 intensive process. The Town Building
Inspection process also provides a very high level of service. For example, Town BUilding Inspectors conduct four inspections on the residential reroof while the City ofBan Jose only
conducts one inspection to final the project. This is indicative of virtually all the inspection seD/ices offered by theTown and ensures that property .owners ultimately receive high
quality construction services and that the end product is safe and free of defects. To improve efficiency, staff have made many improvements to streamline both the planning and building
procedures. Council is aware of many of the efforts that have been made to streamline the planning process. However, Council may not be aware of streamlining efforts to streamline building
services. For example, the plan check process for minor construction projects has been reduced reduced froItHWo weeks to three days and plan check process for.major construction projects
has been reduced from four weeks to two weeks. Staff is working to develop an counter plan check process for commercial tenant improvements. However; it is
necessary to work collaboratively with the Santa Clara Fire Department to implement this program because the Fire Department currently requires 10 working days to perform plan check
services on virtually any type of construction project. PUBLIC NOTICE To inform the public of this fee adjustment, two public hearing notices were published. One was published in the
Weekly Metro and one was published in the San Jose Mercury News. In addition, a notice was placed on the Community Department public service counter. CONCLUSION: Staff recommends that
Council approve the attached resolution amending the Town of Los Gatos Comprehensive Fee SCheflule ,to incorporate a building valuation factor multiplier of 2.32. The building valuation
factor multiplier will become effective 60 days from the date of the adoption of the Resolution. The proposed fee adjustment will generate approximately $650,000 annually and will virtually
eliminate any General Fund subsidy required to support development related services. There will continue to be limited General Fund support for certain advanced planning activities that
are not directly related to development services such as preparation of special studies, plans, and regulations as requested by Council. ENVIRONMENTAL ASSESSMENT: Is not a project defined
under CEQA, and no further action is required.
PAGES SUBJECT: ADOPT RESOLUTION ESTABLISHING A MULTIPLIER FOR CALCULATING THE VALUATION OF CONSTRUCTION February 26, 2004 FISCAL IMPACT:
Adopting the recommended change in the Town's fee schedule will provide greater assurance that the Development process will continue to attain the level of revenues that are necessary
to provide for full cost recovery and full services. Attachments: 1. Resolution. 2. Surveys of Insurance Companies, Contractors and Citiesffowns. 3. Building Valuation Data from Building
Standards. BNL:LMD N:\DEV\Linda\B udget\Valuation Modifier Council Action
RESOLUTION NO. 2004· RESOLUTION AMENDING THE TOWN OF LOS GATOS . COMPREHENSIVE FEE SCHEDULE ESTABLISHING A MULTIPLIER FOR CALCULATING THE VALUATION OF BUILDING CONSTRUCTION WHICH IS
USED TO DETERMINE BUILDING PERMIT FEES. WHEREAS, the construction costs in the Town ofLos Gatos have increased significantly in the last several years; and WHEREAS, the building permit
valuation for the Town of Los Gatos is significantly below actual construction costs; RESOLVED, that the building permit valuation multiplier be adjusted to 2.32%. RESOLVED, that the
new building permit valuation multiplier be adopted. RESOLVED, that the new building permit valuation factor become effective 60 days from the adoption of this Resolution. PASSED AND
ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the day of March, 2004 by the following vote: COUNCIL MEMBERS: AYES: NAYS: ABSENT: ABSTAIN:··
SIGNED:MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST: CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA Attachment 1
SURVEYS OF INSURANCE COMPANIES, CONTRACTORS AND TOWN/CITIES INSURANCE COMPANIES Four (4) insurance companies were surveyed to obtain a cost per square foot on replacement costs for damaged
homes. Cost Per Square Foot California State Auto Associatio $250 Allstate Insurance $200 State Farm Insurance $200 Farmer's Insurance $200 CONTRACTORS Numerous contractors were contacted
to establish a building valuation calculation. These costs are based on a habitable structure, which includes living area, kitchen, and sanitary facilities that are heated. Contractors
provided the price per square foot charged for recent jobs completed. The cost per square foot ranged from $175 to TOWNS/CITIES Several jurisdictions were contacted to compare
our building valuation calculation. Cost Per Square Foot City of Monte Sereno $100-200 City of Saratoga $150 City of Cupertino $107 * City of Capitola $125-300 City of Carmel $166 Town
of Atherton $250 City of Santa Cruz $104 * City of Scotts Valley $107 City of Mountain View $107 * Town of Los Gatos $107 City of Campbell $92 City of San Jose $68 City of Sunnyvale
$107 * City of Santa Clara $106 * * The cost per square foot is augmented by administrative fees resulting in a significant increase in the final building permit fee. Attachment 2
BUILDING VALUATION DATA At the rt3quest of numerous building officials, Building Standards 1M offers the following building valuation data representing average cQsts for most buildings.
Because residential buildings are the most common for many cities, two general classes are considered for these, one for "average" construction and the other for "good." Adjustments
should be made for special architectural or structural features and the location of the project. Higher or lower unit costs may often result. . The unit costs are intended to comply
with the definition of "valuation" in Section 223 of the 1997 Uniform Building Code 1M and thus include architectural, structural, electrical, plumbing and mechanical work, except as
specifically listed below. The unit costs also include the contractor's profit, which should not be omitted. The determination of plan check fees for projects reviewed by the International
Conference of Building Officials will be based on valuation computed from these figures, which were established in April 2002. . *Add 0.5 percent to total cost for each story over three.
**Deduct 20 percent for shell-only buildings. ***Deduct 11 percent for mlnl·warehouses. REGIONAL MODIFIERS The following modifiers are recommended for use in conjunction with the building
valuation data. Additionally, certain local conditions may require further modifications. To use these modifiers, merely multiply the listed cost per square foot by the appropriate regional
modifier. For example, to adjust the cost of a Type III One-hour hotel building of average construction for the Iowa area, select Regional Modifier 0.80 and unit cost from valuation
data, $87.50: 0.80 x 87.50:; $70.00(adjusted cost per square foot) Cost per Square Cost per Square Cost perSqilare Cost per Square Occupancy and Type Foot, Average Occupancy and Type
Foot, Average Occupancy and Type Foot, Average Occupancy lind Type Foot, Avarage 1. APARTMENT HOUSES: 7 DWELLINGS: 13.'JAILS: 20. RESTAURANTS: Type I or II F.R. * .......... $88.70
Type V-Masonry ........ $75.70 Type I or II F.R............$159.10 Type 1II-1-Hour ..;...... $97.40 (Good) $109.20 (Good) $96.90 Type III-l-Hour ......... 145.50 Type III-N .................
94.10 Type V-Masonry Type V-Wood Frame .. 67.30 Type V-l-Hour .......... 109.10 Type V-l-Hour.......... 89.20 (or Type III) ............. 72.40 (Good) $92.40 14. LIBRARIES: Type V-'-N
...;.. ;........... 85.70 (Good) $88.70 Basements-Type I or II F.R............ 116.40 21. SCHOOLS: Type V-Wood Frame .. 63.80 Semi-Finished ........ 20.10 Type 1I-1-Hour .......... 85.20
Type I or II F.R............ 111.20 (Good) $82.00 (Good) $23.20 Type II-N .................. 81.00 Type 1I-1-Hour .......... 75.90 Type I-Basement Garage 37.40 Unfinished..............
14.60 Type III-l-Hour ......... 90.00 Type III-l-I-jour ......... 81.20 2. AUDITORIUMS: (Good) $17.70 Type III-N ................. 85.50 Typelll-N .................. 78.10 Type I or
II F.R. ........... 104.80 8. FIRE STATIONS: Type V-l-Hour .......... 84.50 Type V-'-"-l-Hour .......... .......... 76.10 Type 1I-1-Hour .......... 75.90 Type I or II F.R............
114.40 Type V-N.................. 81.00 Type V-N.................. 72.60 Type II-N .................. 71.80 Type 1I-1-Hour .......... 75.30 15. MEDICAL OFFICES: 22. SERVICE STATIONS:
Type 1II-1-Hour ......... 79.80 Type II-N .................. 71.00 Type I or II F.R.* .......... 119.50 Type II-N .................. 67.20 Type III-N ................. 75.70 Type 1I1-1-Hour
......... 82.40 Type 1I-1-Hour ..;....... 92.20 Type 1II-1-Hour ......... 70.10 Type V-l-Hour .......... 76.30 Type III-N ................. 78.90 Type II-N ......,........... 87.60 Type
V-l-Hour .......... 59.70 Type V-N.................. 71.20 Type V-l-Hour .......... 77.30 Type 1I1-1-Hour ......... 100.00 Canopies ................... 28.00 3. BANKS: Type V-N..................
73.30 Type III-N ................. 93.10 23. STORES: Type lor II F.R.".......... 148.10 9. HOMES FOR THE ELDERLY: Type V-l-Hour.......... 90.20 Type I or II F.R.* .......... 82.40 Type
1I-1-Hour .......... 109.10 Type I or II F.R............ 103.70 Type V-N.................. 87.00 Type 1I....:.1-HoUf.......... 50.40 Type II-N .................. 105.60 Type 1I-1-Hour
........... 84.20 16. OFFICES**: Typell-N.................. 49.30 Type 1II-1-Hour ......... 120.40 Type II-N .................. 80.60 Type lor II F.R.* .......... 106.80 Type 1II-1-Hour
......... 61.30 Type III-N ................. 116.10 Type III-'-l-Hour ......... 87.70 Type lI-'-l-Hour .......... 71.50 Type m"":"'N ................. 57.50 Type V-l-Hour ..........
109.10 Type III-N ................. 84.10 Type II-N .................. 68.10 Type V-l-Hour .......... 51.60 Type V-N.................. 104.50 Type V-l:Hour.......... 84.70 Type 1I1-1-Hour
......... 77;20 Type V-N.................. 47.70 4. BOWLING ALLEYS: Type V-N.................. 81.80 Type III-N ................. 73.80 24. THEATERS: Type II-l-Hour .......... 51.00
10. HOSPITALS: Type V-l·Hour.......... 72.30 Type I or IIF.R............ 109.80 Type II-N .................. 47.60 Type I or II F.R.* .......... 163.20 Type V-N.................. 68.10
Typelll-'-"-l-Hour ......... 80.00 Type 1II-1·Hour ......... 55.50 Type 1I1-1-Hour ......... 135.10 17. PRIVATE GARAGES: Type III-N ................. 76.20 Type III-N .................
51.90 Type V-l-Hour .......... 128.90 Wood Frame............... 24.30 Type V-l-Hour.......... 75.30 Type V-1-Hour .......... 37.40 11. HOTELS AND MOTELS: Masonry.....................
27.40 Type V-N.................. 71.20 5. CHURCHES: Type I or II F.R.* .......... 101.00 Open Carports ............. 16.60 25. WAREHOUSES***: Type I or II F.R............ 99.20 Type
III-l-Hour ......... 87.50 18. PUBLIC BUILDINGS: Type I or II F.R............ 49.40 Type 1I-1-Hour .......... 74.50 Type III-N ................. 83.40 Type I or II F.R.* .......... 123.40
Type II or V-l-Hour ... 29.30 Type II-N .................. 70.80 Type V-l-Hour .......... 76.20 Type 1I-1-Hour .......... 100.00 Type II or V-N ........... 27.50 Type III-l-Hour .........
81.00 Type V-N.................. 74.70 Type II-N .................. 95.60 Type III-lcHour ......... 33.20 Type III-N ................. 77.40 12. INDUSTRIAL PLANTS: Type III-l-Hour .........
103.80 Type III-N ................. 31.60 Type V-l-Hour .......... 75.70 Type I or II F.R............ 56.90 Type III-N ................. 100.20 Type V-N.................. 71.20 EQUIPMENT
Type 1I-1-Hour .......... 39.60 Type V-l-Hour.......... 95.00 AIR CONDITIONING: 6. CONVALESCENT HOSPITALS: Type II-N .................. 36.40 Type V-N.................. 91.60 Commercial
...........: 4.20 Type I or II F.R.* .......... 139.20 Type 1I1-1-Hour ......... 43.60 19. PUBLIC GARAGES: Residential ............. 3.50 Type 1I-1-Hour .......... 96.60 Type III-N .................
41.10 Type I or II F.R.* .......... 48.90 SPRINKLER SYSTEMS.. 2.60 Type 11I-1-Hour ......... 99.00 Tilt·up ........................ 30.00 Type I or II Open Parking* 36.70 Type V-1-Hour
.......... 93.30 Type V-l-Hour .......... 41.10 Type II-N .................. 28.00 Type V-N.................. 37.60 Type 1I1-1-Hour ......... 37.00 Type III-N ................. 32.90
Type V-l-Hour .......... 33.70 . . Eastern U.S. Modifier Connecticut........................ 1.00 Delaware............................ 0.93 District of Columbia............. 0.90 Florida
0.80 Georgia 0.77 Maine................................ 0.86 Maryland 0.86 Massachusetts.................... 0.97 New Hampshire 0.86 New Jersey......................... 1.03 New York
New York City.................. 1.20 Other 0.90 North Carolina 0.78 Eastern U.S. (cont.) Modifier Pennsylvania Philadelphia.................... 1.05 Other 0.88 Rhode Island 0.97 South
Carolina 0.77 Vermont 0.88 Virginia............................... 0.83 West Virginia....................... 0.91 Central U.S. Alabama............................. 0.76 Arkansas 0.75
Illinois 0.97 Indiana 0.91 Iowa 0.87 Central U.S. (cont.)Modifier Kansas............................... 0.87 Kentucky............................ 0.83 Louisiana............................
0.78 Michigan 0.91 Minnesota.. 0.91 Mississippi. :................. 0.74 MISSOUri 0.87 Nebraska.... 0.83 North Dakota...................... 0.86 Ohio 0.87 Oklahoma...........................
0.78 South Dakota 0.84 Tennessee 0.79 Texas 0.77 Wisconsin........................... 0.92 Western U.S. Modifier Alaska................................ ·1.20 Arizona :............. 0.87
California Los Angeles 1.00 San Francisco Bay Area... 1.16 Other 0.97 Colorado ".... 0.92 Hawaii................................ 1.24 Idaho , 0.87 Montana 0.84 Nevada 0.93 New Mexico.................
....... 0.79 Oregon............................... 0.94 Utah 0.84 Washington 0.97 Wyoming 0.84 42 • buildingstanclard:. November-December 2002