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HomeMy WebLinkAboutItem 02 Building Program Fees AGENDA ITEM SUMMARY Meeting Date: 2/19/2013 Meeting Type:Work Session Staff Contact/Dept.: Matt Stouder/DPW Staff Phone No: (541) 736-1035 Estimated Time: 20 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 and provide feedback prior to the 3/4/13 public hearing on the City’s Master Fee and Charges Schedule update. ISSUE STATEMENT: Springfield’s building program is facing a number of challenges including an increasing demand for customer service, an increasing number of permit submittals, and a decline in yearly revenue and staffing reductions. ATTACHMENTS: 1. Rate Comparison 2. Letter from HBA 3. Building Permit Fee Schedule 4. Briefing memo from 2/4/13 work session DISCUSSION/ FINANCIAL IMPACT: As discussed with Council during the 2/4/13 work session on building fees, the City’s Building Fund is facing a number of challenges, including increased permit submittals, declining revenues, staffing reductions and depletions of reserves. Staff presented three options for Council’s consideration to stabilize the Building Fund, including further staff reductions, a fee increase, or a subsidy from the General Fund. As noted in work session, Springfield has not increased building permit fees since 2009 or specialty permit fees since 2007. During the 2/4/13 work session, staff discussed across the board fee increases of 7.5%, 10% and 12.5% for building fees. Council reviewed those proposals and also expressed an interest in receiving additional information on what a tiered increase (with fees for lower value permits being increased more than fees for higher value permits) might look like for a range of projects. That information, as well a general 10% increase, is shown in Attachment 1. Attachment 1 also compares those increases with current fees for Eugene and Lane County. For reference, Eugene last updated their fee schedule in February 2010 and they are planning a 3% increase in April 2013. Lane County’s last update occurred in April 2010 and they are not planning a fee increase this year. Also, as requested by Council, staff has met with the Home Builders Association (HBA) to discuss the proposed fee increases. Feedback from the HBA has been supportive, and they have submitted a letter of support shown in Attachment 2. Additionally, staff will be meeting with the Development Advisory Committee (DAC) during the week of February 18th and will report back to Council with their feedback thereafter. Based on feedback provided by Council regarding either an across the board or a tiered fee increase, staff will make appropriate revisions to Springfield’s Building Safety Fee Schedule shown in Attachment 3 prior to the overall update of the City’s Master Fee and Charges Schedule, scheduled for public hearing on 3/4/13.   10% IncreaseTiered Increase Minimum Permit ($2000)Lane CoEugeneSpringfieldSpringfield 10%Springfield 38% Building  Permit86.95$         80.00$         58.00$           63.80$              80.00$                   Other20.00$         7.20$           2.90$             3.19$                4.00$                     Total106.95$       87.20$         60.90$           66.99$              84.00$                   Addition/Alteration ($10,000 Valuation)Lane CoEugeneSpringfieldSpringfield 10%Springfield 12.5% Building Permit140.00$       148.88$       136.00$         149.60$            153.00$                Structural Plan Review84.00$         96.77$         81.60$           97.24$              99.45$                   Subtotal224.00$       245.65$       217.60$         246.84$            252.45$                Other51.52$         22.11$         10.88$           12.34$              12.62$                   Total275.52$       267.76$       228.48$         259.18$            265.07$                New Construction ($50,000 Valuation)Lane CoEugeneSpringfieldSpringfield 10%Springfield 10% Building Permit500.00$       468.70$       465.25$         511.78$            511.78$                Plan Review325.00$       304.66$       302.41$         332.65$            332.65$                Subtotal825.00$       773.36$       767.66$         844.43$            844.43$                Other189.75$       69.60$         38.38$           42.22$              42.22$                   Total1,014.75$   842.96$       806.05$         886.65$            886.65$                New Single Family ($200,000, 2000 sf, 500 sf Garage)Lane CoEugeneSpringfieldSpringfield 10%Springfield* Building Permit1,106.55$   1,001.13$    1,115.75$     1,227.33$         1,199.43$             Plan Review719.26$       650.73$       725.24$         797.76$            779.63$                Plumbing (3 bath)474.75$       660.00$       439.00$         482.90$            482.90$                Mechanical*245.15$       217.00$       135.00$         148.50$            148.50$                Electrical**221.00$       338.00$       204.00$         224.40$            224.40$                Sub‐Total w/o Add'l Fees2,766.71$   2,866.86$   2,618.99$     2,880.89$         2,834.86$             Other515.01$       258.02$       130.95$         144.04$            141.74$                Total3,281.71$   3,124.88$   2,749.94$     3,024.93$         2,976.60$             * Kitchen Hood, 3 Bath Fans, 100 K Furnace, Clothes Dryer, Gas  Piping ** 200 Amp Service, 20 Circuits* Indicates 7.5% increase for Building Permit & Plan Review, 10% for specialty permits New Construction ($600,000 Valuation) Lane CoSpringfieldEugeneSpringfield 10%Springfield 7.5% Building Permit2,666.55$   2,743.75$    2,249.13$     3,018.13$         2,949.53$             Structural Plan Review1,733.26$   1,783.44$    1,461.93$     1,961.78$         1,917.20$             Subtotal4,399.81$   4,527.19$   3,711.06$     4,979.91$         4,866.73$             Other759.97$       226.36$       334.00$         249.00$            243.34$                Total5,159.78$   4,753.55$   4,045.06$     5,228.90$         5,110.06$             New Construction ($1.5 million Valuation)Lane CoSpringfieldEugeneSpringfield 10%Springfield 7.5% Building Permit6,176.55$   6,046.70$    5,057.13$     6,651.37$         6,500.20$             Structural Plan Review4,014.76$   3,930.36$    3,287.13$     4,323.39$         4,225.13$             Subtotal10,191.31$ 9,977.06$   8,344.26$     10,974.76$      10,725.33$           Other1,628.70$   498.85$       750.98$         548.74$            536.27$                Total11,820.00$ 10,475.91$ 9,095.25$     11,523.50$      11,261.60$           Existing Rates Attachment 1    February 11, 2013 Mayor and Council 225 Fifth Street Springfield, OR 97477 Re: Testimony pertaining to the proposed increase to the Springfield Building Program Fees. Dear Mayor and Council: On behalf of the Home Builders Association of Lane County and the Homebuilders Construction Company, Inc. please accept this letter explaining our position on the proposed increase to the Springfield Building Program Fees. The Springfield Building Program Fees have not been increased since 2009. Staff has been reduced from 13.6 FTE to a bare-bones current level of 6.9 FTE. All reserves funds have been depleted. Any more reduction of staff could jeopardize Springfield’s ability to qualify as a full service building program with the state BCD. It’s apparent to us that there really is only one option on the table for you to consider. Further staff reductions will have a negative affect on keeping Springfield open for business and the current budget restraints do not allow the general fund to subsidize the program at this time. It’s also apparent to us that, in the current economic situation, the department’s fees should collate closer to the cost of providing the service within the six different fee structures. Currently, the New Single Family, New Construction ($600,000 value), and New Construction ($1.5 million value) subsidize the three smaller fee structures. We have certainly appreciated staff’s willingness to allow us to be part of the solution to a difficult situation. We are in support of the new fee structure presented by staff and we encourage you to support it as well. It is our hope and belief that the current work by the Springfield Development Advisory Committee will continue to discover new efficiencies that will absorb this increase and result in more savings thus keeping Springfield open for business. Sincerely, Ed McMahon Executive Vice President Home Builders Association of Lane County 1065 River Road, Eugene, OR 97404 (541) 484-5352 www.hbalanecounty.org Attachment 2 ATTACHMENT 3 - 1 ATTACHMENT 3 - 2 ATTACHMENT 3 - 3 ATTACHMENT 3 - 4 ATTACHMENT 3 - 5 ATTACHMENT 3 - 6 ATTACHMENT 3 - 7 ATTACHMENT 3 - 8 ATTACHMENT 3 - 9 ATTACHMENT 3 - 10 ATTACHMENT 3 - 11 ATTACHMENT 3 - 12 ATTACHMENT 4 - 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 4 - 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 4 - 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.