This Brea Fee Study (see attached report) basically covers development related fees for service. These fees are imposed to cover the reasonable costs to the City for processing entitlements, issuing licenses and permits, conducting inspections, and other activities conducted by Planning, Building, Public Works and Fire Services. The purpose of the study was to identify all the allowable costs for a fully-burdened rate and to ensure that the existing and proposed rates do not exceed the cost of providing services.
As compared to past fee updates, the City approached this fee update through a comprehensive, professional cost of service analysis including a City-wide cost allocation plan as well as a much more complete information on direct and indirect departmental cost than in past efforts. Essentially, the more complete information identifies allowable costs that were previously not included in the City’s fee calculations.
The results of the study show the City overall is currently recovering 56% of allowable costs associated with providing these services. To clarify, the vast majority of the City's development and construction related fees are currently administered as an hourly rate charged to a customer based on the actual time spent working on a project; however, that hourly rate itself is outdated and is not currently capturing all the allowable costs the City incurs to perform this work. In other words, while City staff are charging time spent working on projects but the current hourly rates are recovering only 56% of allowable costs.
BACKGROUND
The City maintains three (3) rates for charging developer project (Cost Center) accounts for development and construction: management; technical/professional and inspection. The current rates were last updated in 2003 (all rates) and 2008 (inspection only). Based on review of City agenda reports; discussions with staff and base salary information from 2003, it appears that the current rates included direct labor costs (salaries and benefits) and an overhead rate of 29% to cover certain direct non-labor costs such as services and supplies, and allocated indirect costs such as building maintenance, vehicle costs, IT costs, etc. Since 2003, these costs have increased.
In addition to the costs used to develop the City’s current hourly rates, the fee study identifies certain allowable costs that have not been included in the City’s previous and current hourly rate calculations. These costs are mostly indirect costs (division, department and City-wide allocated costs) and support costs (review required from internal departments for approval). These eligible costs have been added to the City’s fee calculations as appropriate.
Overall, the following items are the main drivers for the change in the proposed rates are as follows:
- Based on base salary for mid-range planning and engineering positions, labor costs have increased 35% - 38% since 2003.
- The cost of holiday, vacation and other leave time (paid non-work hours) which were not previously included have been taken into account when developing the hourly labor rate. This change increases hourly rate costs by approximately 12% - 15%.
- There are allowable costs which have not previously been included in the City’s hourly rate calculations, such as department and City-wide support as well as the cost associated with managerial, supervisory, clerical duties, etc. which represents an additional 12% - 64% of additional allowable costs.
Based on these costs, the current hourly rates are only covering between 51% and 73% of the allowable cost of “fully-burdened” hourly rate for these services. The following is a summary of the current rates as compared to the proposed rates at 100% cost recovery; the current hourly deficit and the current recovery percentage rate:
| Description |
Current
Hourly Rate |
Full Cost Recovery
Hourly Rates |
Current Hourly Surplus/
(Deficit) |
Current Hourly Rate Recovery Percentage |
| Planning |
|
|
|
|
| Management |
$126 |
$201 |
($75) |
63% |
| Plan Check |
$94 |
$136 |
($42) |
69% |
| Building |
|
|
|
|
| Management |
$126 |
$253 |
($127) |
50% |
| Plan Check |
$94 |
$183 |
($89) |
51% |
| Inspection |
$88 |
$161 |
($73) |
55% |
| Fire Prevention |
|
|
|
|
| Plan Check |
$94 |
$128 |
($34) |
73% |
| Inspection |
$88 |
$128 |
($40) |
69% |
| Engineering |
|
|
|
|
| Management |
$126 |
$175 |
($49) |
72% |
| Plan Check |
$94 |
$174 |
($80) |
54% |
| Inspection |
$88 |
$171 |
($83) |
51% |
Proposed Fees and Comparisons
Appendix A.1 through A.4 to the attached Brea Fee Study Report are the proposed fee tables which outline how the cost of service for each activity was calculated. For those activities that are deposits or "Cost Center Accounts", the recommended fee level is the initial deposit amount the City would collect. For ease of administration, the recommended initial deposits have been rounded down to the thousand or five hundred. While the recommended cost recovery for these items may be listed at less than 100% for these items due to rounded initial deposit recommendation, the hourly rate that will be charged against this amount is based on 100% cost recovery.
Certain development activities are charged based on a flat fee. Those fees have been calculated based on these same hourly rates and the estimated number of hours to process a typical permit. Those activities that are recommended for flat fees are so noted on the fee tables. The majority of these items are simple permits, such as:
- Temporary signs
- Small Appliance Installation
- Residential Re-roof
- Water heater installation
- Driveway approach
- Fire Permits & Inspections
- Overnight Parking Permits
In some cases, staff has recommended a flat fee at less than 100% cost recovery to encourage compliance with City codes.
Appendices B.1 and B.2 to the attached Brea Fee Study Report outline the comparison of the proposed hourly rates and flat fees to our neighboring communities. Many of the activities in our neighboring communities are not on a deposit-based system using hourly rates and actual time worked. However, where hourly rates are used for these activities in other communities, the hourly rates range from $36/hr to $195/hr. Flat fees vary for each activity. For example, staff is recommending $100 for a water heater permit. In the neighboring cities, the fee ranges from $32-$148. For temporary signs, staff is recommending $75, and the neighboring cities charge from $32-$181.
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Section 6 of the study states the following:
Predicting the amount to which any adopted fee increases will affect Department revenues is difficult to quantify. For the near-term, the City should not count on increased revenues to meet any specific expenditure plan. Experience with these fee increases should be gained first before revenue projections are revised. However, unless there is some significant, long-term change in activity levels at the City, proposed fee amendments should – over time – enhance the City’s revenue capabilities, providing it has the ability to stretch other resources further for the benefit of the public at large.
Staff is recommending the hourly rates as proposed for 100% or full cost recovery. Assuming the City’s current estimated revenues represent 56% of full cost recovery, the potential increase in revenue is approximately $668,000 per year based on similar development activity. However, staff concurs with the consultant’s recommendation not to count too heavily on increased revenues in the near-term.
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