HomeMy WebLinkAboutItem 01 Building Program Fees AGENDA ITEM SUMMARY Meeting Date: 2/4/2013
Meeting Type:Work Session
Staff Contact/Dept.: Matt Stouder/DPW
Staff Phone No: (541) 736-1035
Estimated Time: 30 minutes
S P R I N G F I E L D
C I T Y C O U N C I L
Council Goals: Provide Financially
Responsible and
Innovative Government
Services
ITEM TITLE: BUILDING PROGRAM FEES
ACTION
REQUESTED:
Evaluate options to keep Springfield’s building program sustainable.
ISSUE
STATEMENT:
Springfield’s building program is facing a number of challenges including
increased demands for customer service, increased numbers of permit applications,
a decline in yearly revenue and staffing reductions.
ATTACHMENTS: 1. Council Briefing Memo
2. Rate Comparison – Current Rates
3. Rate Comparison – 7.5%
4. Rate Comparison – 10%
5. Rate Comparison – 12.5%
DISCUSSION/
FINANCIAL
IMPACT:
The State of Oregon has delegated to the City of Springfield the authority to
provide a full service building program. As part of administering the program, state
requirements dictate the City provide adequate funds, equipment and resources
necessary to administer and enforce the program. Furthermore, State Statute
requires that revenue collected for building activity be spent only on activities that
directly support the building program.
Traditionally, Springfield has enjoyed a healthy level of building activity and
associated revenues due to a large amount of high value construction in the
community. This has allowed revenue collected from permit fees to build a healthy
reserve even though the City’s fees are among the lowest of comparable
jurisdictions. The overall philosophy for managing the Building Fund has been to
store excess revenue during times of high activity to supplement the fund during
periods of low activity. With the downturn in the economy however, expenditures
have exceeded revenues for the last 4 years, resulting in the depletion of reserves
and staffing reductions from 13.6 FTE to 6.9 FTE within the program. At the same
time, the overall number of permits issued has increased during the past 4 years, in
part due to an increase in the number of lower value construction projects applied
for (alterations/additions/minor work, etc.).
Another contributing factor to the instability of the Building Fund is that
Springfield has not increased building permit fees since 2009 or specialty permit
fees since 2007. Not surprisingly, the City’s fees are near the bottom when
compared to other jurisdictions. Attachment 2 shows how Springfield compares to
other jurisdictions under existing rates, while Attachments 3, 4 and 5 show
Springfield’s placement when compared to other agencies for a fee increase of
7.5%, 10% and 12.5%, respectively.
To help stabilize the Building Fund, staff has identified three options – further
staffing reductions, building permit fee increases, and subsidizing the program with
General Fund monies. These options are described in more detail in Attachment 1.
ATTACHMENT 1 - 1
M E M O R A N D U M City of Springfield
Date: 2/4/2013
COUNCIL
BRIEFING
MEMORANDUM
To: Gino Grimaldi, City Manager
From: Matt Stouder, Managing Civil Engineer
David Bowlsby, AIC Building Official
Len Goodwin, Development and Public Works
Director
Subject: Building Program Fees
ISSUE: Springfield’s Building program is facing a number of challenges including increased
demands for customer service, increased numbers of permit applications, a decline in yearly
revenue and staffing reductions.
COUNCIL GOALS/
MANDATE:
Financially Responsible and Stable Government Services
BACKGROUND:
Consistent with Oregon Administrative Rule, the State of Oregon has delegated to the City of
Springfield the authority to provide a full service building program which provides for the
administration and enforcement of all building specialty code programs. As part of
administering a full service program, the State requires that jurisdictions provide adequate funds,
equipment and other resources necessary to administer and enforce the program. To meet that
requirement, the City assesses building fees for construction activity based upon the valuation of
construction, as required by Oregon Administrative Rule. Along with fees assessed by the City,
the State of Oregon collects a 12% surcharge on all building activities. Furthermore, state
statute requires that revenues collected for building activity be spent only on activities that
directly support the building program.
In the past, the level of high value building activity has, allowed the City to build a healthy
reserve, despite having some of the lowest fees in the region. That trend, however, ended in
2009 when expenditures exceeded revenues due to the downturn in the economy. Revenues
continued to decline from 2010 through 2013, and reserves were used to meet the gap between
expenditures and revenues. Correspondingly, through position eliminations and staffing re-
allocations, the number of positions funded in the building program fell from 13.6 FTE in fiscal
year 2009 to 6.9 FTE in fiscal year 2013. Further reductions/re-allocations may be necessary in
fiscal year 2014 to meet continued budget shortfalls. In addition, the once healthy reserve
enjoyed by the building program has been exhausted.
At the same time that revenues were declining between 2009 through 2013, the number of
building permits the City received increased as shown in the table below, resulting in an
increased demand on staff resources due to the FTE reductions described above. This is due to
an increase in the number of low (construction) value permits submitted and a decrease in the
number of high value permits submitted. This type of activity is not unusual in a slow economy
where people are willing to make investments in more minor work such as remodels, additions,
etc. rather than large value commercial projects. In the last calendar year, more than 50% of
building permits applied for at the City had a construction value of under $10,000.
ATTACHMENT 1 - 2
2009 2010 2011 2012
Permit Revenue $976,288 $822,889 $772,329 $713,141
Records Created 1855 2052 2838 2566
Another factor which has compounded the revenue and expenditure problem is that Springfield
has not increased general building permit fees since January 1, 2009, and has not increased
Specialty Code permit fees since calendar year 2007. Prior to the last fee increases, the City
assessed a 10% administrative fee on all building permit activity. That fee was waived in July
2006, in favor of the current 5% technology fee. Additionally, in 2008, the State of Oregon
raised the surcharge they collect on building fees from 8% to the current rate of 12%, which is in
addition to the City’s fees and passed directly on to the permit applicant.
Comparison to Other Agencies
In comparing Springfield’s building program fees to other agencies, staff looked at those
agencies that were of similar size to Springfield and/or located within Lane County. Fees were
then analyzed over a broad range of valuation for construction activity. Attachment 2 shows the
comparison to other agencies for the following scenarios: a $10,000 addition/alteration project, a
new $200,000 single family home, a new construction project valued at $600,000, and a new
construction project valued at $1,500,000.
To provide an apples to apples comparison, like fee types were included to provide a true sense
of how building permits fees differed by agency. Fees included in the calculation for each
scenario were the building permit fee, the plan review fee, and other fees which directly or
indirectly support building program activities (i.e. technology fees, administrative fees, etc.)
Not included in the fee calculation were planning surcharges, construction excise tax fees, or
other agency unique fees, since those fees vary widely from agency to agency, if they are
applicable. Also not included was the State of Oregon surcharge fee, which is standard across
all agencies at 12%. As shown in the Option 2 below, Springfield is near the bottom for all four
scenarios with respect to building fees, a fact likely attributable to four consecutive years
without a fee increase.
Given the sustained level of building permit activity and continued projected revenue concerns,
staff has prepared three options for Council’s consideration with respect to stabilizing the
building fund.
Option 1 – Further Reductions in Staffing
To meet continued declining revenues, the City could further decrease staffing. However, due to
previous reductions, staffing levels are already at a minimum with respect to providing a “Full-
service program” as defined by Oregon State Statute, even with all staff being cross certified.
Therefore, to reduce staffing, cuts would need to be made uniformly across the program (i.e.
moving all positions to 0.8 FTE), impairing the City’s ability to provide timely plans review and
inspections services to applicants. Further reductions beyond a 0.8FTE scenario would likely
result in Springfield’s building program defaulting to the State of Oregon.
Option 2 – Increase Permit Fees
To help stabilize the program budget and bring Springfield more in line with comparable
agencies for permit fees, the Council could consider authorizing a fee increase. Attachment 3
shows how a 7.5 % increase would impact permit fees for a $10,000 addition/alteration, a new
ATTACHMENT 1 - 3
$200,000 single family home, a new $600,000 construction project and a new $1.5 million
construction project in comparison to other agencies. As can be seen from the graphs, a 7.5%
increase in permit fees results in three of the four scenarios (addition/alteration, new single
family and new $600,000 construction) remaining on the low side when compared with the other
agencies. The new $1.5 million construction project moves into the middle range.
Attachment 4 applies an increase of 10% to Springfield’s building permits fees and compares
that increase to fees assessed by other agencies. Review of the graphs show a 10% increase
moves three of the scenarios (new single family, new $600,000 and new $1.5 million) into the
middle range when compared to other agencies, while the addition/alteration remains on the low
side.
Attachment 5 applies an increase of 12.5% to Springfield’s building permit fees and compares
that increase to fees assessed by other agencies. A 12.5% increase results in the lower value
addition/alteration scenario remaining on the low side, while the new $600,000 and $1.5 million
projects move into the middle range, and the new $200,000 value single family home is on the
high side.
Option 3 – Subsidize the Building Fund via the General Fund
Another option to stabilize the building fund would be to subsidize it with general fund monies.
While this option is viable, the City is currently facing a $1.9 million budget gap in the General
Fund in FY14. It is likely that significant reduction efforts in every department will be necessary
to meet that gap. A decision to provide direct support to the Building program would exacerbate
that problem and might be a diversion of resources to a program that, while important, might
have a lower priority in the minds of the public than the services historically funded by the
General Fund, including public safety services.
RECOMMENDED ACTION: Staff recommends Council consider Option 2 to increase
Building program fees by 10% and provide staff with any feedback prior to the larger discussion
on the overall City Master Fee and Charges Schedule, to occur at work session on February 19th.
$406.35
$334.70 $329.42
$275.52 $270.27 $269.68 $267.76
$244.27 $233.94 $228.48
$210.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
Addition/Alteration ($10,000) ‐Current Rates
$4,431.85
$3,491.65
$3,344.33 $3,281.71
$3,124.88
$3,002.00 $2,935.20 $2,903.75
$2,752.00 $2,749.94
$2,663.29
$2,200.00
$2,600.00
$3,000.00
$3,400.00
$3,800.00
$4,200.00
$4,600.00
New Single Family ($200,000) ‐Current Rates
ATTACHMENT 2 ‐ 1
$7,515.59
$5,787.83
$5,458.85 $5,445.00 $5,383.95
$5,159.78
$4,912.80 $4,753.55
$4,311.04 $4,233.20 $4,045.06
$2,500.00
$3,500.00
$4,500.00
$5,500.00
$6,500.00
$7,500.00
$8,500.00
New Construction ($600,000) ‐Current Rates
$13,720.88
$13,198.85
$12,511.95
$11,820.00
$11,466.60 $11,220.00
$10,475.91
$10,176.79
$9,633.20 $9,578.09
$9,095.25
$7,000.00
$9,500.00
$12,000.00
$14,500.00
New Construction ($1.5 Million) ‐Current Rates
ATTACHMENT 2 ‐ 2
$406.35
$334.70 $329.42
$275.52 $270.27 $269.68 $267.76
$253.29 $244.27 $233.94
$210.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
Addition/Alteration ($10,000) ‐7.5%
$4,431.85
$3,491.65
$3,344.33 $3,281.71
$3,124.88
$3,002.00 $2,935.76 $2,935.20 $2,903.75
$2,752.00
$2,663.29
$2,200.00
$2,600.00
$3,000.00
$3,400.00
$3,800.00
$4,200.00
$4,600.00
New Single Family ($200,000) ‐7.5%
ATTACHMENT 3 ‐ 1
$7,515.59
$5,787.83
$5,458.85 $5,445.00 $5,383.95
$5,159.78 $5,110.06
$4,912.80
$4,311.04 $4,233.20
$4,045.06
$2,500.00
$3,500.00
$4,500.00
$5,500.00
$6,500.00
$7,500.00
$8,500.00 New Construction ($600,000) ‐7.5%
$13,720.88
$13,198.85
$12,511.95
$11,820.00
$11,466.60 $11,261.60 $11,220.00
$10,176.79
$9,633.20 $9,578.09
$9,095.25
$7,000.00
$9,500.00
$12,000.00
$14,500.00
New Construction ($1.5 million) ‐7.5%
ATTACHMENT 3 ‐ 2
$406.35
$334.70 $329.42
$275.52 $270.27 $269.68 $267.76 $259.18
$244.27
$233.94
$210.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00 Addition/Alteration ($10,000) ‐10%
$4,431.85
$3,491.65
$3,344.33 $3,281.71
$3,168.97 $3,124.88
$3,002.00 $2,935.20 $2,903.75
$2,752.00
$2,663.29
$2,400.00
$2,800.00
$3,200.00
$3,600.00
$4,000.00
$4,400.00
New Single Familly ($200,000) ‐10%
ATTACHMENT 4 ‐ 1
$7,515.59
$5,787.83
$5,458.85 $5,445.00 $5,383.95 $5,228.90 $5,159.78
$4,912.80
$4,311.04 $4,233.20 $4,045.06
$2,500.00
$3,500.00
$4,500.00
$5,500.00
$6,500.00
$7,500.00
$8,500.00
New Construction ($600,000) ‐10%
$13,720.88
$13,198.85
$12,511.95
$11,820.00
$11,523.50 $11,466.60 $11,220.00
$10,176.79
$9,633.20 $9,578.08
$9,095.25
$7,000.00
$9,500.00
$12,000.00
$14,500.00
New Construction ($1.5 million) ‐10%
ATTACHMENT 4 ‐ 2
$406.35
$334.70 $329.42
$275.52 $270.27 $269.68 $267.76 $265.07
$244.27 $233.94
$210.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
Addition/Alteration ($10,000) ‐12.5%
$4,431.85
$3,491.65
$3,410.68 $3,344.33 $3,281.71
$3,124.88
$3,002.00 $2,935.20 $2,903.75
$2,752.00
$2,663.29
$2,400.00
$2,800.00
$3,200.00
$3,600.00
$4,000.00
$4,400.00
New Single Family ($200,000) ‐12.5%
ATTACHMENT 5 ‐ 1
$7,515.59
$5,787.83
$5,458.85 $5,445.00 $5,383.95 $5,347.74 $5,159.78
$4,912.80
$4,311.04 $4,233.20 $4,045.06
$2,500.00
$3,500.00
$4,500.00
$5,500.00
$6,500.00
$7,500.00
$8,500.00
New Construction ($600,000) ‐12.5%
$13,720.88
$13,198.85
$12,511.95
$11,820.00 $11,785.40
$11,466.60 $11,220.00
$10,176.79
$9,633.20 $9,578.09
$9,095.25
$7,000.00
$9,500.00
$12,000.00
$14,500.00
New Construction ($1.5 million) ‐12.5%
ATTACHMENT 5 ‐ 2