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Staff Report"" o MEETING DATE: 6/4/12 ITEM NO: 13 � os � ca`oS COUNCIL AGENDA REPORT DATE: MAY 31, 2012 TO: MAYOR AND TOWN COUNCIL FROM: GREG LARSON, TOWN MANAGER v SUBJECT: ADOPT RESOLUTION AMENDING FY 2012/13 COMPREHENSIVE FEE SCHEDULE TO CONTINUE AND ADJUST CERTAIN DEPARTMENT FEES, RATES, AND CHARGES RECOMMENDATION Adopt resolution approving an amendment to certain development fees for FY 2012/13 (Attachment 1). BACKGROUND The Town's financial policies require that certain fees for services be maintained to allow for cost recovery based on the actual cost to provide those services. "Fee" activities are services and functions provided by the Town to individuals who receive some direct material benefit above and beyond services offered at general taxpayer expense. ` At the January 2012 Town Council Retreat, the Town Council considered various budget reduction and revenue enhancement measures in the document entitled "Budget Adjustment Priority Matrix Summary." These measures were arranged into three tiers, with Tier 1 classified as the highest priority and easiest to implement. Along with other budget reduction measures, the Community Development Department listed increased enhancements through adjustments to certain development fees consistent with the Town's cost recovery policy. The Town Council directed this revenue measure to remain in the Tier I category for implementation with the 2012/13 budget. The Town's cost recovery model for development- related fees is predicated on fee analyses that are conducted on a periodic basis. The fee analysis calculates the total Town staff time and materials involved in processing all planning and building permits. The last fee analysis, which was conducted in 2010 (Attachment 3), indicated that planning and building fees were recovering approximately 46 percent and 70 percent, respectively, of the fill cost to process the permits. PREPARED BY : Wendie R. Rooney, Director of Community Development /b Reviewed by: Assistant Town Manager Town Attorney Finance N: \DEV \TC REPORTS2oOFY 2012 -13 Fee Adj- C11c1.Rpt.6- 4- 12docx PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION APPROVING AN AMENDMENT TO CERTAIN DEVELOPMENT FEES FOR FY 2012/13 May 31, 2012 On May 21, 2012, a budget hearing was held to consider the FY 2012/13 proposed Operating and Capital Budget. Revenue enhancements, including several building and planning fee adjustments were presented to Council for future consideration at a public hearing scheduled for June 4, 2012. The FY 2012/13 budget assumes approximately $50,000 in revenue from the proposed building and planning fees. DISCUSSION The following section describes the proposed fees in detail, including an alternate reduced option for residential based fees in response to Council discussion at the May 21, 2012 budget meeting. A. Building Fees Building permit fees are used to recover the cost of providing building inspection services on construction and administrative support for the inspection process. Building permit fees are assessed based on building valuation. The valuation is determined by multiplying the building gross floor area, average construction cost (per square foot), and the permit fee multiplier. Staff does not recommend a change in the actual permit fee but instead, proposes to use an updated building valuation schedule that more accurately presents the overall cost of the structure. The valuation schedule the Town has been using for tfie past 10 years is the International Conference of Building Officials (ICBO) 2002 schedule. The ICBO schedule is no longer in existence and has been replaced with the International Code Council (ICC) Building Valuation Data publication. The most recent schedule is February 2012. The ICC schedule uses the same approach to calculating building valuation as the ICBO schedule; however, the valuations are based on current construction costs. The valuation schedule would not affect the fees assessed for Electrical, Mechanical, or Plumbing permits but would likely increase most of the Building Permit fees on the order of 10 to 12 percent. The 2010 fee study concluded that overall, the inspection program for building development fees are only 70% cost recovery. Therefore, the implementation of the recommended ICC Building Valuation Schedule would increase the cost recovery to approximately 80 %. B. Planning Fees As noted in the May 21, 2012, staff report, the Planning Division is only recovering 9 to 57 percent of its cost to process development applications. The 2010 fee study further concluded that to be cost recovery, planning development fees would need to be increased from 1 I to 813 percent, depending on the type of permit. The Town's cost for processing most development applications are driven by the amount of staff time involved to process the application given the Town's high standards for quality development and extensive community involvement. Although Town policy has been to strive to be 100 percent cost recovery, staff recognizes that fee increases need to be PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION APPROVING AN AMENDMENT TO CERTAIN DEVELOPMENT FEES FOR FY 2012/13 May 31, 2012 sensitive to Town residents and local business owners. Therefore, staff recommends a varying range of fee adjustments, some limited fee reductions and using a time and materials approach rather than flat fee to more accurately assess the cost of the services on certain types of applications. The recommended changes are further described below and the recommended fees are outlined in the second column of Attachment 2 and the new verbiage is noted in bold. 1. Modified Fees a. Planned Development and Rezoning Recover 100 percent of Planned Developments (PD) and Rezoning applications by assessing the fees on actual time and materials basis. For major projects, the fee would be similar to or higher than the current fee (ranges from $21,881 to $32,802) depending on the project. However, for minor PD's and modifications to PD's, the fee would typically be significantly lower (approximately $5,000 for minor modifications which currently cost approximately $16,400). b. Restaurant CUP's Re- establish tier one and tier two categories for restaurant CUP's. Tier 1 would be the current fee and applied to restaurants that do not serve alcohol or provide entertainment, and tier two would be for restaurants that are proposing to serve alcohol and or provide entertainment. These latter types of applications involve a significant ambunt of staff review and processing time. The fee increase for Tier 2 CUP's would be approximately 30 percent, from $4,391 to $5,708. 2. Lower Fees for Applications which are part of a PD a. Architecture and Site for Single Family Modify the fee language so that the fee for Architecture and Site applications for single family homes which were approved as part of a PD is not charged on a per unit basis (as is currently charged), but on a plan or model type basis. Currently, the Town charges per unit regardless if each unit is a custom design or a model unit. This will result in a significantly lower application fee for non - hillside PD's, which typically consist of model homes. Any changes proposed to model homes during the Architecture and Site process would require a supplemental fee based on a time and material basis to review the changes. b. Architecture and Site for Non - Residential and Multi- Family Reduce the fee for Architecture and Site applications for non - residential and multi- family developments that are part of an approved PD where Council has authorized through the PD that the Development Review Committee (DRC) is the deciding body. Over the past few years, PD's have been approved allowing the DRC to be the deciding body for these types of applications. The DRC process is a more streamlined process, and the major review time of these applications occurs PAGE 4 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION APPROVING AN AMENDMENT TO CERTAIN DEVELOPMENT FEES FOR FY 2012/13 May 31, 2012 during the PD process. Therefore it is recommended that the fees be lowered from $6,335 to $3,362 for non - residential and from $5,761 to $3,362 for multifamily. It It is further recommended that this fee be charged per building, which is similar to the existing single family unit fee. Therefore, depending on the number of buildings that are proposed for the development, the resulting total fee could be higher or lower than the existing fee. Any changes proposed to the buildings during the Architecture and Site process would require a supplemental fee based on a time and material basis to review the changes. PD's that were approved with conceptual elevations will be charged the non -PD application fee. c. Subdivisions of Four Lots or Less Reduce the fee for Subdivisions of four lots or less that are part of an approved PD where Council has authorized through the PD that the Development Review Committee (DRC) is the deciding body, for the same reasons discussed above. It is recommended that the fees be lowered from $6,146 to $2,691. d. Subdivisions of Five Lots or More Reduce the fee for Subdivisions of five lots or more that are part of an approved PD where Council has authorized through the PD that the Development Review Committee (DRC) is the deciding body, for the same reasons discussed above. It is recommended that the fees be lowered from $9,746 to $3,156. 3. Increased Fees a. Ten Percent Increase Increase all fees, excluding Home Occupation Permits, annexation applications, and those fees discussed specifically in this report, by 10 percent to gradually transition to cost recovery for planning services. Staff is not recommending a fee increase for annexations, since the Town historically has been encouraging county island property owners to file annexations and a fee increase could be a disincentive. Staff is also not recommending an increase for Home Occupations permits since these permits are already at 100 percent cost recovery. b. 100 percent Cost Recovery Increase fees for CDAC applications and Administrative Land Use Permits (ALUP). Increase CDAC fee from $1,743 to $2,752 and increase ALUP fee from $129 to $1,177 for minor permits and $1,557 to $2,799 for major permits. The existing CDAC fee is very low for this type of review and there is considerable staff time involved in the project review, processing and CDAC meeting. ALUP's are for wireless telecommunication facilities. Minor ALUP's are for Microcell facilities and major ALUP's are for all other new or modified facilities that do not require a CUP. Most wireless telecommunication facilities require a CUP rather than an ALUP (the Town has only received one ALUP application per year over the last three years). PAGE 5 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION APPROVING AN AMENDMENT TO CERTAIN DEVELOPMENT FEES FOR FY 2012/13 May 31, 2012 c. Increase Planning Commission review of Architecture and Site application fee for two family units (duplexes) The current fee schedule is in error in that the fee is lower than the fee for a single family /two family residence at the DRC level. The recommended fee is the cost at the DRC level ($2,470) plus the fee for applications which are referred from the DRC level to the Planning Commission level ($4,705) which totals $7,175. C. Alternatives Recognizing that the Town's policy is to strive towards cost recovery for services, staff is recommending increases to certain development related fees. With the exceptions noted above, staff is recommending a gradual approach to raising fees by increasing most fees by approximately 10 percent, as per the 2010 fee study. At the May 21, 2012, Council meeting, two Council members noted concerns with raising fees relative to single family homes and remodeling. Consequently, staff offers the following alternatives for increasing fees for these types of permits, a more gradual rate. 1. Building Fees Increase the fees by the recommended 10 to 12 percent. • Alternate 1: Implement the new ICC 2012 Building Valuation Schedule, but reduce the recommended fee increase by 50 percent, which would result in an approximately 5 to 6 percent fee increase this year and consider future increases with the FY2013/14 Fee Schedule. • Alternate 2: Same as Alternate 1, but lowering the increase to 2 or 3 percent fee increase this year. 2. Planning Fees Increase the fees as discussed earlier in this report. There are seven different planning fees related to individual (non- developer) single family new construction or improvements. These are Architecture and Site applications for new single family /two family, hillside single family, and; minor /other projects (i.e. exceeding FAR and grading permits); Minor Residential Development applications secondary dwelling unit permits; and fence height exceptions (see highlighted items in Attachment 2. The fee descriptions in italics in Attachment 2 under Architecture and Site reflect separating the fee description between residential and commercial). • Alternate 1: Maintain existing fees for the aforementioned single - family related planning permits (see first column in Attachment 2, highlighted items). • Alternate 2: Increase the fees by 5 percent (See third column in Attachment 2, highlighted items). PAGE 6 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION APPROVING AN AMENDMENT TO CERTAIN DEVELOPMENT FEES FOR FY 2012/13 Nfay 31, 2012 Finally, in regards to the Planning Fees, staff is requesting Town Council direction regarding additional recommendation to lower fees and streamline applications; however, these recommendations would require amendments to the Town Code which would be considered at a later date by the Planning Commission and the Town Council and would require amendments to the fee schedule. These include the following: • Allow DRC to be the deciding body of Architecture and Site applications for two family units (duplexes). Although categorized in the fee schedule, Town Code requires the Planning Commission to be the deciding body. This would result in a fee reduction of approximately $2,470 based on the corrected fee adjustment noted earlier in this report. • Allow DRC to be the deciding body of time extensions which currently the Planning Commission is the deciding body, where no changes are proposed to the plan. This is anticipated to reduce the fee by approximately $1,679 to $8,196 depending on the type of application. • Eliminate DRC review of building permits for parking lot improvements. There is no fee for this review. This would be a time and material savings to the Town and the applicant. • Create a minor CUP category that the DRC can approve for the following types of uses which are located outside the Central Business district and do not have any traffic impacts: instruction classes for art, music, dance, karate, and yoga. These types of CUP's have historically been approved on the consent calendar. This is anticipated to reduce the fee by approximately $1,891. CONCLUSION In keeping with the Town's financial policy that requires that certain fees for services be maintained to allow for cost recovery based on the actual cost to provide those services, it is recommended that adjustments be made to development fees that are not consistent with Town policy. The majority of the proposed fee adjustments provide a gradual transition toward cost recovery, and it is anticipated that further gradual transition would occur in future years until the Town aligns the cost of services and fees. Therefore, it is recommended that Council approve the attached resolution amending the Comprehensive Fee Schedule (Attachment 1) incorporating fee adjustments as reflected in Exhibit A. If Council determines that an alternate fee for Building and /or Planning should be implemented as discussed above and outlined in Attachment 2, Council should direct staff to incorporate those changes in the Comprehensive Fee Schedule (Exhibit A of Attaclunent 1). PAGE 7 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION APPROVING AN AMENDMENT TO CERTAIN DEVELOPMENT FEES FOR FY 2012/13 May 31, 2012 FISCAL IMPACT The Town's financial policies require that fees be maintained to provide for the recovery of costs associated with Town services. The proposed fee adjustments better represent the cost to deliver services. If approved, staff will incorporate the fee changes into the Town's FY 2012/13 Comprehensive Fee Schedule. Using conservative activity projections, the estimated increase in revenue is approximately $50,000. Attachments 1. Resolution of the Town Council of the Town of Los Gatos Amending Certain Fees for FY 2012/13 (includes Exhibits A) 2. Schedule of Recommended Building and Planning Fee Increases and modified language 3. Excerpts from the 2010 User Fee Study N:1DEV\TC REPORTS\20121FY 2012 -13 Fee Adj- Cnc1.Rpt.6- 4- 12.docx PHIS PAGE INTENTIONALLY LEFT BLANK RESOLUTION NO. 2012 - RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS AMENDING CERTAIN FEES FOR FY 2012/13 WHEREAS, the Town of Los Gatos financial policies require that the Town establish and maintain all user charges and fees based on the cost of providing services; and WHEREAS, the Town of Los Gatos periodically prepares a fee analysis that assesses the cost of services and the recovery level for each of the fees; and WHEREAS, the 2010 Fee Analysis indicated that development related (Planning and Building Division) fees were recovering approximately 46 percent and 70 percent, respectively, of the cost to process the permits; and WHEREAS, the Town Council proposes to gradually adjust the development fees to strive toward cost recovery. NOW, THEREFORE, BE IT RESOLVED that the Town of Gatos' Building and Planning Division FY 2012/13 fee schedule is hereby amended as attached hereto as Exhibit A. BE IT FURTHER RESOLVED that the FY 2012 -2013 Comprehensive Fee Schedule is hereby amended to incorporate these additionally adopted fee adjustments. BE IT FURTHER RESOLVED that the newly adopted fees shall be become effective August 18, 2012. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 18th day of June 2012, 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 N: \DEV \RESOS\2012 \FY2012 13 Fee Inerease.docx THIS PAGE IiNTENTIONALLY LEFT BLANK