Clark County Community Development is in a pickle.
Faced with the need to balance its budget and little forecasted development to buoy revenue, the department has proposed increasing development fees associated with preliminary review, environmental review, final review, development inspection and building.
In December, the department presented a revised fee structure to the Board of Clark County Commissioners that included many increased fees for 2009.
While some proposed fees decreased, the majority did not.
And for the first time, the proposed fee structure included establishing a base fee for five services plus an hourly rate.
In terms of aggregate product, the proposed fees were 90 percent higher than current costs, said Community Development Director Marty Snell.
Ron Edwards, president of Vancouver-based Western Construction Services Inc. and developer of a mixed use project in Felida, estimated the development fees for the project would have jumped 31 percent if adopted.
Among some drastic proposed fee increases were preliminary plan review for home businesses: A minor urban and rural type I review increasing from $103 to $1,728 and the base fee for a major rural type II review increasing from $645 to $4,381.
After a vastly negative response from the development community, Commissioners Steve Stuart and Marc Boldt ultimately denied the proposal on Dec. 30, asking department staff to meet with stakeholders to create a more workable fee structure.
Weighing the need
In an effort to cut costs, Community Development has laid off about 34 employees. But also key for balancing the department’s budget is raising revenue, Snell said.
There was a roughly 8 percent increase in fees across the board in July, but the current fee structure wasn’t built on knowing the department’s true costs.
“If we don’t know our true costs but are still charging the same fee, we know we’re undercharging because when 2007 rolled up, we were about $2.3 million short in revenue to pay for our costs,” Snell said.
To cover the losses, the county used money from its general fund.
The cost of service fees doesn’t include total costs – capturing employees’ salaries and benefits, not overhead or countywide indirect costs (costs of financial services, payroll, prosecution, human resources and others), Snell said.
The current fees also include a policy decision that 10 percent of cost is covered by the general fund. For example, if a service costs $1,000, only $900 would be charged to the applicant and $100 would come from the general fund.
In theory, there is public benefit in new commercial development, so the public ought to pay a portion of the cost, Snell said. In the proposed structure, 100 percent of the cost recovery is through fees, with no assistance from the general fund.
“In terms of the economy, the fact that we don’t have nearly as much development makes it even more pronounced,” he said.
The proposed fee increases were arrived at by developing an hourly rate by program area.
“We looked at what we expect for development activity, how much time it takes to process X, Y or Z application, multiplied the hourly rate times the amount of time it takes – then compared it to the current fee structure,” Snell said.
There were a dozen major fees for which the county lost the most amount of money, including single family residential, commercial, remodel and preapplication conferences.
“When we had a high volume (of projects) and a low fee, it covered our costs and then some,” Snell said. “But when the level of building permits drop and it’s still a low fee, you can’t balance a budget.”
The proposed fee structure would have brought in about $4 million for the county. That included $300,000 and $500,000 technology and rainy day reserves, respectively.
A new twist
The idea for establishing a base plus hourly rate for five services – site plan review, subdivision and short plat, commercial building plan review, commercial building permits and inspection – came from examining how other jurisdictions handle fees.
Clark County’s average projected hourly fee was $140 per hour, compared to King County’s $170.
The concept of having a true cost-based fee system has garnered a positive response – a base plus hourly fee could be considered such.
“If I’m willing to do my part to make sure my plans are complete, I should be rewarded,” Edwards said.
But Snell said such systems raise concerns for the county.
Administratively and logistically, the county would have to set up accounts receivable and accounts payable systems, and the county can’t extend credit to the private sector, he said.
“There are a couple of reasons we can’t say, Oh sure, we’ll bill like a law firm,” Snell said.
Opposition to the plan
At hearings, there was an outcry from the building community for the county to operate more efficiently before increasing costs.
“We had the biggest response in opposition to these increases that I have seen since the 2004 Comprehensive Plan update,” said Mike Bomar, political affairs director of the Building Industry Association of Clark County.
The BIA has met with county staff about the proposed increases and Bomar said there is a balance to be struck between maintaining levels of service and keeping the permitting costs at a reasonable level.
“The public, the county and the industry will all benefit from an efficient fee structure, and I believe we have the right people at the table to make that happen,” he said.
The proposed fee increases come relatively soon after a $1.2 million settlement between the BIA and Clark County related to high building permit fees.
The BIA’s responsibility is to protect its members from wasteful government spending, Bomar said.
“The county is trying to do the right thing here by making the department more accountable to its customers and the public,” he said. “Both are a response to the goal of making the permitting process more efficient.”
“Any fee increase in this day and age of our economic climate is absolutely absurd,” said Vancouver Realtor Gary Brewer at a Board of County Commissioners hearing. “We have people who won’t make any decisions because they don’t know what’s going to happen next month.”
Snell acknowledged the concern about raising fees in a time when new building projects are scarce and the economy is bearing down.
“It’s the worst possible timing to look at increasing anything – fees, taxes, anything,” he said. “But I have a department with certain costs.”
Edwards said increased fees are inevitably passed along to the public.
“If you’re paying more for fees, it affects your investors, customers, lessees and trickles right down to the public – the public pays either way,” he said. “I get that the county has to adjust its overhead, just like I do. But we can’t pass the burden on now.”
Edwards offered his mixed-use project to the county for a cost-analysis study.
The commisioners will look at the issue again, likely in the spring with new commissioner Tom Mielke on board – who in his campaign opposed fee increases, adding another element to the mix.
“We can look at other revenues, but more than likely, they will come from the general fund and we know they’re strained,” Snell said. “If I cut more and more, I won’t have staff to do any work. As work comes in, there won’t be anybody to do it.”
Megan Patrick-Vaughn can be reached at mpatrick@vbjusa.com.
