CITY COUNCIL: Criteria to Waive Certain City Fees

Meeting Date: February 7, 2012
Prepared by: Heidi Burch Asst. City Administrator

City Council
Agenda Item Summary

Name: Consideration of criteria to waive certain City fees.

Description: The City Council continues to receive is .an increased number of requests to waive fees. These requests are generally for one of three categories: 1) Planning & Building permits, 2) community events, and 3) community facilities. Council directed staff to draft a policy on fee waivers for its consideration.

Financial Impact: The financial impact will need to be determined. Any Council action reducing fees will result in lost budgeted revenue.

Staff Recommendation: Staff recommends Council not change the rates of the Building and the Community Event fees but that it consider the attached Fee Waiver Policy encompassing both Building and Community Event fees. Staff further recommends the Council consider updating the facility use fees in lieu of a waiver policy. A number of users are not paying the current Council's adopted rate and this provides an opportunity to reaffirm or change the rates.

Important Considerations: Since most events occur on the weekends, unbudgeted overtime costs are incurred in departments such as the Police and Public Works when those fees are waived. Additionally, in cases where staff cannot work on the weekends, the City must hire hourly personnel from a private contractor. These costs are not calculated into department budgets and, consequently may cause budget shortfalls or the deferral of other projects to cover the costs. Fees also are projected as departmental revenue during the City's budget process. These revenues help offset departmental costs and preserve service levels. Fee waivers negatively affect the revenue projections and may cause departments to defer or abandon projects due to a lack of funding.

Decision Record:
On July 12, 2011 , City Council adopted Resolutions approving revisions to the Planning and Building and the Community Services fee schedules.

Reviewed by:

Jason Stilwell, City Administrator Date

CITY OF CARMEL-BY-THE-SEA
DEPARTMENT OF COMMUNITY PLANNING AND BUILDING
STAFF REPORT
TO: MAYOR MCCLOUD AND COUNCIL MEMBERS
THROUGH: JASON STILWELL, CITY ADMINISTRATOR
FROM: HEIDI BURCH, ASST. CITY ADMINISTRATOR
SEAN CONROY, BUILDING SERVICES MANAGER
DATE: FEBRUARY 7, 2012
SUBJECT: CONSIDERATION OF CRITERIA TO WAIVE CERTAIN CITY FEES

BACKGROUND
The City Council is being approached more frequently with requests to waive fees. Fees are implemented in order to offset direct and indirect costs for services such as contracted plan check services, utilities, NO PARKING signs, traffic cones, barricades, facilities maintenance costs and overtime or outside personnel costs as well as costs for City staff
time. Fees are projected as revenue annually during the budget process.
Fee waivers generally fall into three categories: 1) Planning & Building Permits; 2) Community Events; and 3) Community Facilities. During the review of a recent request to waive the building permit fees for a project, the Council directed staff to bring back a policy on fee waivers. This report addresses the three fee waiver categories with a draft
fee waiver policy attached.

EVALUATION

Planning & Building Permits: The Department of Community Planning and Building currently only waives fees for accidental emergencies or natural disasters (fires, tree damage, flooding, etc.) that were not the fault of the owner. Per CMC Section 17.32.100.F, a 25% fee reduction is also available for some qualifying historic preservation projects. No other fee waivers or reductions are authorized.

There is a fiscal impact when fees are waived. Fees are charged to recoup the costs associated with reviewing construction documents and monitoring construction activities. Building permit fees generally include a plan check fee, a road impact fee, the actual building permit fee and other State required fees. The road impact fee is generally the most expensive of all of the fees. For example, the total fees for a project valued at $300,000 would be about $6,560 (plan check = $1,374, building permit = $2,113, road impact = $3,000, state = $73). The plan check fee is a direct cost to the City as the City contracts out for plan check services.

Cities throughout the country have adopted wide ranging fee waiver policies either to provide incentives for a particular type of development or to provide assistance to certain individuals or organization. Many communities, like the City of Carmel, incentivize historic preservation projects. More and more communities are including fee reductions or waivers as an incentive for green building or renewable energy projects. Many communities have adopt downtown or neighborhood revitalization districts, in which projects that result in specific improvements to an area can qualify for fee waivers. Others have adopted policies to waive fees related to the construction of affordable housing or for certain nonprofit activities.

The two most recently approved fee waivers by the City Council involved nonprofit organizations. It is likely that future fee waiver requests will come primarily from nonprofit organizations. Staff is recommending that the Council consider the following three options for Planning and Building fees:

1) Adopt a fee reduction, 15% for example, that would apply to all nonprofit applications. This option would avoid the need to adopt more formal review criteria and would also avoid having requests come before the Council.

2) Adopt a policy that would allow for the waiver of fees for certain qualifying nonprofit projects. The attached draft policy would implement option #2.

3) Maintain policy of not waiving fees.

Community Events:

The City Council has seen a marked increase in fee waiver requests for events within the City. In the past, the Council has typically granted only “free use” days for the use of the Sunset Center. Requests now include waivers of items such as: special event permit fees; grant writing fees; Police and Public Works staffing costs; costs for street closures; costs for the use of Devendorf Park, the Beach and other City properties and even cash contributions.

As a means of cost recovery for services being rendered in various departments, the Council adopted a new fee schedule for events, which took effect in July 2011.

In considering criteria for waivers of fees associated with Community Events, the Council may want to consider 1) the economic impact of the event, i.e. does the event bring people into town overnight, or are people likely to visit the restaurants and shop before or after the event and 2) contributions to the community, i.e. is the event a nonprofit, charitable event or fundraiser.

Additionally, Council may want to require that fee waiver requests be supported by financial information. A proposed budget should accompany each request. In the case of events that are not new, financial information from previous years also should be required. Virtually all of the fee waiver requests have come from organizations that have
purported to have a charitable component to their events. Supporting financial documentation will help the Council determine if the charitable financial impact on the community is substantive and a good use of public funds.

Community Facilities:

Fees associated with the use of Community facilities pertain, in particular, to the use of Vista Lobos. In July 2011, the Council adopted resident and non-resident fees for the use of Vista Lobos.

The current adopted fees for use of Vista Lobos are as follows:

Description Fee
Vista Lobos Rm only $110–4 hours (Residents) $150–4 hours (Non residents)
Vista Lobos Rm & kitchen $110–4 hours (Residents)$150–4 hours (Non residents)

With the exception of the Carmel Residents Association, which has paid the adopted fee for the use of the facilities, every other current user has requested a reduction of the fees. In light of this, rather than developing waiver criteria, the Council may want to revisit the adopted fee structure and consider modifying it one of three ways by: 1) creating a slightly higher hourly rate for those users who wish to use it for less than the current fourhour minimum; 2) creating a rate exclusively for non-profit organizations; or 3) creating a rate for the long-time users, effectively grandfathering them in. However, the rates are based on costs incurred, sunk costs and opportunity costs.

For reference, hourly rates were calculated for each of the current user groups:

Annual Fees--Hrs per yr--Hourly Rate
Good Morning Carmel $1800 782 $2.30
Science of the Soul $5720 104 $55
Sun Street Centers $2860 208 $13.75
Carmel Residents Association $550 10 $55

As evidenced by the calculations in the above table, the Council may wish to address consistency and equitability of the current fees prior to or in lieu of waiver criteria.

FISCAL IMPACT

When determining whether or not to waive fees, there are a few financial considerations the Council should take into account. In previous Council deliberations, it was noted that waiving costs associated with staff time was acceptable because staff would be paid regardless of how their time is spent. As such, it was seen as simply reallocating staff time. This, however, is not always the case. Because most events occur on the weekends,
unbudgeted overtime costs are incurred in departments such as the Police and Public Works when those fees are waived. Additionally, in cases where staff is unable to work on the weekends, the City has to hire hourly personnel from a private contractor. These costs are not calculated into department budgets and consequently, may cause budget shortfalls or the deferring of other projects to cover the costs.

Additionally, fees are projected as revenue for each department annually during the City’s budget process. These revenues are key sources to offset departmental costs and preserve service levels to the community. These revenue projections are impacted negatively by fee waivers and may again cause departments to defer or abandon projects due to a lack of funding.

RECOMMENDATION

Staff recommends Council not change the rates of the Building and the Community Event fees but consider the attached Fee Waiver Policy encompassing both Building and Community Event fees. Staff further recommends the Council consider updating the facility use fees in lieu of a waiver policy. A number of users are not paying the current Council adopted rate, giving Council an opportunity to reaffirm or change the rates.

CITY COUNCIL POLICY C12-01
FEE WAIVERS

I. Purpose.

II. Building Permit Fees

III. Community Event Fees

IV. Application Process

I. Purpose.
The City is regularly approached to waive fees for a variety of purposes. Fee waivers generally fall into two categories: 1) Building Permits and 2) Community Events. This policy is designed to outline criteria for the submittal and review of fee waiver requests.

II. Building Permit.
Fees Eligible for Waivers:
• Building Permit Fee
• Road Impact Fee

Fees not Eligible for Waivers:
• Plan Check Fee
• Fees imposed by other agencies (school fees, SMIP, etc.)

Criteria:
• The fee waiver is associated with a project being submitted by a certified 501(c)3 nonprofit organization, is sponsored by a government agency or receives public funding; and
• The proposed project is of obvious public benefit. Evidence of public benefit includes, but is not limited to, projects that:
i. Are exclusively dedicated to the provision of affordable housing as
defined in CMC Section 17.70;
ii. Provide a public facility not presently available in the community;
iii. Have generated obvious, substantial community support; or,
iv. Would either reduce City costs or increase City revenue.

III. Community Event Fees
Fees Eligible for Waivers:
• Special Event Permit Fee
• Fees associated with street closures
• Fees associated with events on the beach or at City Parks
• Parking stall fees

Fees not eligible for Waivers:
• Grant writing expenses
• Damage deposits
• Overtime costs for City personnel
• Costs for contracted personnel

Criteria:
• What will be the economic impact on the community?
• What charitable contributions to the community will be made, either directly or indirectly?

Documentation Required with Waiver Request:
• Detailed scope of the event
• A proposed budget
• Past financial statements for established events

IV. Application Process.
• An applicant shall submit in writing a request for a fee waiver to the City Clerk.
• The request shall be placed on a future Council agenda for review by the
City Council.