HomeMy WebLinkAboutStaff Report 6638
City of Palo Alto (ID # 6638)
City Council Staff Report
Report Type: Action Items Meeting Date: 3/28/2016
City of Palo Alto Page 1
Summary Title: Cost of Services Study
Title: PUBLIC HEARING: Review and Adoption of a Resolution Increasing and
Adjusting Department of Planning & Community Environment User Fees
Based on a Cost of Services Study and Recommendations of the Finance
Committee
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that the City Council adopt the resolution included as Attachment A
approving the specified changes to Planning & Community Environment fees based on the Cost
of Services Study (Attachment B) and the recommendation of the Finance Committee
(Attachment C).
Executive Summary
The Department of Planning and Community Environment undertook a Cost of Services Study in
2015 to evaluate fees charged to developers and property owners seeking discretionary
planning entitlements. These fees had not been reevaluated for many years, and the resulting
recommendations -- if adopted -- would result in increased fee revenues and lower general
fund subsidies for application processing in the Department consistent with the Cost Recovery
Policy adopted by the City Council in May 2015.
The proposal would change the fee schedule by eliminating some fees, consolidating others,
and by adjusting fees that are collected as flat fees and fees that are billed on an hourly basis.
The City Council has the discretion to charge less than the amount required for full cost
recovery, but not more. The Finance Committee reviewed an initial draft of the fee schedule
changes, and the proposed resolution has been crafted to incorporate the Committee’s
recommendation.
Background
Fees for services (sometimes called user fees) are charged to recover some or all costs incurred
in providing a special service from which one or more individuals obtain a special benefit.
City of Palo Alto Page 2
Public agencies can establish fees to recover up to 100% of the estimated reasonable cost of
providing such service. Any amount of a particular fee that is more than 100% of the cost is
considered a special tax and, by law, requires approval by two-thirds of the electorate. Fines,
rents, and certain other charges are not considered user fees and are not required to be based
on actual costs. These types of charges are more typically governed by policy based on market
rates, reasonableness, or public goals.
The Department of Planning & Community Environment charges user fees to applicants
requesting planning entitlements and related services. Planning entitlements include
discretionary actions such as Architectural Reviews, Individual Reviews, Site and Design,
Conditional Use Permits, Variances, Zoning and Comp Plan Amendments. Planning fees do not
include building permits or permit fees for property maintenance, such as roof replacements or
water heater replacements. Those activities fall within the Development Services department.
While Planning fees have been annually adjusted across the board based on inflation factors,
it’s been at least five years since they have been subject to a full evaluation based on the cost
of providing services.
Council adopted a User Fee Cost Recovery Level Policy (Staff Report 5735) on May 18, 2015 that
suggests high, medium, and low levels of cost recovery based on policy considerations, such as
the degree of public versus private benefit associated with the activity for which a fee is
established. As shown below, services that are regulatory in nature (e.g. review for compliance
with zoning regulations) and for which individual users receive most or all of the benefit (e.g.
developers requesting approval of a planning approval), generally fall in the “high” cost
recovery level group.
Table 1. Cost Recovery Policy Summary
Cost Recovery
Level Group
Cost Recovery
Percentage Range
Policy Considerations
Low 0% - 30% No intended relationship between the
amount paid and the benefit received
Fee collection would not be cost effective
and/or would discourage compliance with
regulatory requirements
No intent to limit the use of the service
Public at large benefits even if they are not
the direct users of the service
Affordability of service to low-income
residents
Medium 30.1% - 70% Services which promote healthy activities
and educational enrichment to the
community
Services having factors associated with the
low and high cost recovery levels
High 70.1% - 100% Individual users or participants receive most
or all of the benefit of the service
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Cost Recovery
Level Group
Cost Recovery
Percentage Range
Policy Considerations
Other private or public sector alternatives
provide the service
The use of the service is specifically
discouraged
The service is regulatory in nature
Source: Palo Alto City Council Staff Report No. 5735, May 18, 2015
The cost of services study report, included as Attachment B, identifies the cost of providing
planning services for which the City charges fees. Under State law, fees cannot be set above
the cost of service for one fee to compensate for a lower cost recovery decision for another fee
(sometimes referred to as cross-subsidization). Thus, while Council is not bound to set fees to
match the cost of providing services, fees cannot be set that exceed the cost of delivering the
service in question. As described in the adopted Cost Recovery Policy cited above, Council has
the discretion to determine the level of cost recovery in which each of these fees fall and
traditionally assigns lower levels of cost recovery to some fees, like appeal fees, where a higher
cost might limit the use of appeals.
The City retained the services of Capital Accounting Partners (CAP) to assist in the preparation
of the cost of services study for planning fees in the Planning and Community Environment
Department (PCE) and a limited number of Development Services (DS) fees. As the study
progressed, the contract was amended to add Development Services fire prevention fees.
These fees are not part of this report; instead they will be part of the Development Services
study. Development Services is examining all their fees under a separate study, now underway.
The operating budget for the Planning and Community Environment Department relies on two
major sources: the General Fund and fees charged for services. The Department’s Fiscal Year
2016 Adopted Operating Budget is $8.9 million, and approximately $1.2 million in revenue is
generated from user fees. Other sources of revenue account for approximately $0.6 million, so
the department’s General Fund support currently comprises approximately $7.1 million, or
approximately 80 percent of the Department’s budget.
Chart 1
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Source: Planning & Community Environment Adopted Operating Budget, FY2016
It is important to note that the Department has many activities that are not related to fees,
including many activities in the transportation, long range planning, and code enforcement
divisions of the department. This means that a high level of General Fund support is not
surprising; however the consultant’s analysis has confirmed that the current level of General
Fund subsidy of fee-related services is not consistent with the adopted cost recovery policy and
fee adjustments are warranted. When fees for services are below 100% cost recovery, a
subsidy is being provided to fee payers, because the annual revenue collected for all fee-related
services is less than the estimated citywide costs of providing those services.
Discussion
The methodology used in CAP’s study is fairly standard for analyzing the cost of providing fee-
related services:
1. The costs of services that are not fee-related, including transportation and parking
fees, are not included in the scope of this particular study. Most of those are set by
City Council as a matter of policy, or by a State agency.
2. CAP identified all direct staff time spent on the fee-related activity or service. Direct
staff costs are incurred by employees who perform tasks directly related to the
service, for example the cost of staff time to review an Architectural Review
application. CAP conducted a series of meetings with staff from PCE, DS, and the City
Attorney’s office to identify every employee, by classification, who performs work
directly in support of a fee related service. Through the meetings with staff, CAP
gathered estimates of how much time each of those employees spends, on average,
working on that particular service or program.
3. CAP calculated direct cost of the staff time for each fee using productive hourly rates.
A full-time employee typically has 2,080 paid hours per year. In keeping with standard
methodologies, CAP reduced that number to account for non-productive hours (sick
leave, vacation, holidays, training, meetings, participation in non-core services, etc.).
CAP calculated the productive hourly rate for each position, by person, based on the
salary and benefit information provided by the City. Their report indicates that annual
productive hours range from 1,400 to 1,600.
4. CAP identified other operational costs that are also considered direct costs. For
instance, PCE relies heavily upon on-call consultants to provide expertise and address
increased demand. These costs are directly attributable to certain services and are
included in direct cost computations.
5. CAP then determined indirect (or overhead) costs. These costs include citywide and
department overhead. Citywide overhead costs are allocated to each operating
City of Palo Alto Page 5
department through the Cost Plan Allocation. Allocated costs include expenses
incurred by central services departments; in other words, departments in the City that
provide services to all departments. These include the offices of the City Manager,
City Attorney, City Auditor, City Clerk, Administrative Services, People Strategy and
Operations, Information Technology, and Facilities Maintenance. Department
overhead costs include managers, supervisors and support staff as well as other
operational costs that are incurred for a common purpose. For instance, customer
service, reception, staff report preparation, support of the Architectural Review Board,
Historic Resources Board, Planning and Transportation Commission, and overall
management are part of these costs. They are not assigned to a particular service or
program. Once these costs are determined, they are proportionally allocated to fees.
Fees for services are structured in two ways: flat fees and time and materials fees, for which
the Department collects and charges against deposits. Flat fees apply to those activities for
which an average amount of processing time and effort can reasonably be determined.
Deposits are taken when staff time to provide the service is expected to vary widely.
Applications such as Site and Design or major projects requiring Architectural Review Board
involvement may require 50 hours of work or up to 500 hours, depending on the project. In
these cases, a deposit amount set at the minimum needed to complete staff work is identified
in the Municipal Fee Schedule. Once a deposit is received, staff track the amount of effort
involved in providing service and charges are made against the deposit using the appropriate
hourly billing rate(s), including overhead. The applicant is kept informed of all charges against
the deposit and if the deposit is exhausted and additional work is still required, the applicant is
billed for additional charges. Similarly, the applicant is refunded if costs total less than the
deposited amount. Staff involved in these activities generally span several departments. If
consultants are required, consultant fees are also charged to the applicant.
Council may want to assign lower levels of cost recovery to some or all fees. Council may wish
to consider fees for major development projects involving the Architectural Review Board
Council at a very high level of cost recovery whereas they may prefer to assign a lower level of
cost recover to activities like Individual Review. As an example, the current fee for a Use Permit
for a childcare facility is set at a significantly lower rate than the fee for a Regular Use Permit
(about 4% of regular permit fee), based upon a past policy decision.
Recommended Adjustments to Fees
The Fiscal Year 2016 Municipal Fee Schedule includes 89 Planning fees for services. Of these,
18 are deposit-based fees and 71 are flat fees. In the attached recommendations, some fee
structures have been changed to make them simpler, for better accuracy, or to make it easier
to recapture full costs. Specifically:
- 32 existing fees are recommended for deletion because they can be combined with
another fee or are no longer appropriate.
- 20 new fees are recommended to be established (16 flat fees, 4 deposit-based fee)
City of Palo Alto Page 6
- Hourly billing rates which are charged against deposits are recommended to be
increased an average of 57 percent to better capture direct and indirect costs.
Although the attached report identifies the cost of delivering services, whether to set fees to
full cost recovery and whether to adjust to full cost recovery immediately or phase in the
changes are Council decisions. Staff’s recommendation to the Finance Committee was to
increase all fees in two phases: the first phase would be effective in Fiscal Year 2017, updating
fees to 50 percent of the increase toward full cost recovery; the second phase, effective Fiscal
Year 2018 would increase fees to full cost recovery. The only exceptions were wireless fees,
appeals fees, Child Care Facility Use fees, and fee reductions, wherein the final fees would be
effective in Fiscal Year 2017. The Finance Committee recommended increasing deposit-based
fees and staff hourly rates to 100 percent cost recovery effective Fiscal Year 2017. These fees
generally apply to large, complex projects. The Committee also supported staff’s
recommendation that fixed, flat fees be adjusted in two phases, as shown in Attachment A1.
The first phase would close 50 percent of the gap between current fees and full cost recovery,
beginning Fiscal Year 2017 (FY 17). The second phase would bring the fee to full cost recovery
in Fiscal Year 2018 (FY 18), assuming no changes outside the standard cost of living increases to
provide services in the interim. Phasing-in fee adjustments is a common practice, and staff
feels it is appropriate here because of the magnitude of some of the changes proposed.
Recommended fee adjustments include
Changes to legal fees: There are currently 23 legal review fees in the Planning
Department section of the Fiscal Year 2016 Municipal Fee Schedule. Under this
study, when only a few hours of legal time is involved in providing the service,
that time has been incorporated in the planning fee and the separate legal fee
has been eliminated. In coordination with the City Attorney’s office, five new
legal fees are recommended to be established and 22 existing legal review fees
are recommended to be deleted, since they have now been included in the
appropriate planning fee.
Contract administration: Assess a 25 percent charge for the City to administer
and manage cost recovery contracts for projects handled by consultants. In
many instances, the City charges applicants for consultant time dedicated to a
particular project. The costs of these contracts are deducted from deposits paid
in accordance with the Municipal Fee Schedule. Customers are invoiced if
contract costs exceed the deposit. This study institutes new fees which can be
applied to recoup the cost of City overhead for contracts administration and
project management given that even the best consultant work product needs to
be reviewed by staff.
Tiered wireless fees: to reflect the full range of effort involved in wireless
facilities.
1 For the three new tiers of wireless fees, the rates will not be phased. Also, where fees are decreasing, the new
fee will be instituted without phasing.
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Additional public noticing: This new fee covers the cost of noticing beyond a 600
foot radius and additional rounds of noticing.
A cost recoverable research fee which will be charged at the level of the staff
position conducting the research.
A planning compliance fee for ensuring compliance with entitlements and zoning
that go beyond the building permit review.
A full cost-recovery pre-screening fee: for applicants proposing rezoning, zoning
text amendments, development agreements, Comp Plan amendments, or
specific plans.
a fee, borne by the project applicant, to recover the full cost of appeals.
adjustment of hourly rates charged against deposits to include updated
overhead (Attachment B). An example of how these rates compare to other
cities is shown in Table 2, below. (It should be noted that only Beverly Hills
reported recently completing a fee study to set or update fees.)
Rates charged to public
Sources: Contact with individual
cities via email or phone, December,
2015
City Hourly top step Annual maximum
With
Performance
Incentive:
Hourly max *
With
Performance
Incentive:
Annual max *
Hourly
top step
Annual
maximum
Palo Alto
(proposed)
53.33$ 110,926.40$ N/A N/A
$125.17/hr. Sr. Planner
(current);
$195/ hr. Sr. Planner
(proposed)
San Mateo +59.13$ 122,994.84$ 66.69$ 138,726.72$ $149/hr. regardless of
position
Los Gatos 55.87$ 116,209.60$ N/A N/A Not available
Saratoga *58.01$ 120,660.80$ 63.96$ 133,036.80$ N/A N/A $112.04
Mountain View 64.13$ 133,390.40$ 76.22$ 158,537.60$ $181/hr Principal Planner;
$138/hr. Sr. Planner
Redwood City
58.71$ 122,116.80$ 62.71$ 130,436.80$
$143.15/hr. Principal
Planner;
$123.30/hr. Sr. Planner
Beverly Hills
51.13$ 106,356.00$ 58.78$ 122,256.00$ $482/hr. Principal Planner;
$383/hr. Sr. Planner
* Saratoga has Performance Incentive Compensation for those at top step for 5 years with a cumulative performance rating of satisfactory
+ San Mateo charges a flat $149 for all planning positions.
Senior Planner Salaries- September, 2015
Sources: City websites
Principal Planner Salaries-
September, 2015
Souces: City websites
Table 2, Hourly Charges for Comparison Cities
Finance Committee Recommendation
The Finance Committee reviewed the Cost of Service study on February 2, 2016. The
Committee recommended implementing the new fees but requested an estimate of the impact
of fee increases on residential and non-residential development. Since many projects are
mixed use, a precise estimate would require researching every project to determine impact. A
City of Palo Alto Page 8
very rough estimate of the impact to residential development can be calculated by considering
the increases to Individual Reviews (review of two story homes). Individual Review fees are the
largest fees applying to residential development only. They apply to the addition, replacement,
or construction of a two story residence. Proposed increases to Individual Reviews are
estimated to result in increased revenue of $133,000 in FY 17 and an additional $120,000 in
FY18. This equates to 22% of the projected total revenue increase in FY17 and 25% of the
projected total revenue increase in FY18. Even if the application fees attributable to the
residential component of mixed-use projects were added to these totals, substantially more of
the fee increases would derive from non-residential development than residential
development. This could change, of course, if the City starts to see more residential
development and less non-residential development over time.
Adjusting fees as recommended will result in some significant fee increases. Staff has provided
a draft of proposed fee and hourly rate changes to members of the Development Customer
Advisory Group (DCAG) for their input. If all fixed fees and deposits are increased to bring them
to a 100 percent cost recovery level, the estimated revenue increase is $1 million: $.6 million in
Fiscal Year 2017 and the full $1 million in Fiscal Year 2018.
Chart 2, below, displays the impact on the General Fund subsidy if Council approves the fee
changes in the attached study. Recommendations (shown as Fee Study revenue increases in
the table below) will reduce the General Fund support in the department budget from 80
percent to 69 percent. As noted earlier, the Department has many activities that are not
related to fees, including many activities in the transportation, long range planning, and code
enforcement divisions of the department, and the suggested level of General Fund reflects this
scope of activities.
Chart 2
City of Palo Alto Page 9
Source: Planning & Community Environment, January 2016
Possible Adjustments Below Cost Recovery
Staff recommends that Council identify any services to be subsidized and the level of
subsidization. Among the fees staff recommends subsidizing are appeal fees and use permit
fees for day care facilities. (Since the day care facility use permit fee has been subsidized in the
past, the proposed final fee shown equals 50 percent of the cost of service.) The Council may
also wish to consider subsidizing Individual Review (IR) fees, although the staff’s
recommendation is based on the full cost of cost of services. Subsidizing these fees (perhaps
for smaller homes) could be justified by the scale of the projects and the public benefit of the IR
process, which ensures neighborhood compatibility of new single family homes.
Timeline & Next Steps
Staff recommends the increase of fees in two phases:
Phase 1 – Adjust flat fees by 50 percent of suggested increases concurrent with the FY17
budget. Adjust deposit-based fees by 100 percent of suggested increases concurrent
with the FY17 budget. Estimated revenue impact = $.6 million or a 50 percent increase
in fee based revenue.
Phase 2 – Adjust flat fees by the remaining 50 percent concurrent with the FY18 budget.
Estimated revenue impact = $1 million ($.6 million in FY 17 and an additional $.4 million
effective FY 18), or an 82 percent increase in fee based revenue.
Based on State law, fee adjustments can become effective no less than 60 days after Council’s
adoption of the resolution, which is proposing implementation in phases as noted above.
Following adoption and implementation of the new fees, Staff will review procedures related to
billing for cost recovery projects, with the goal of identifying necessary improvements and
resources to achieve a level of cost recovery that is consistent with the City’s adopted policy.
Resource Impact
If Council approves the proposed fee adjustments, the result would be to eliminate the General
Fund subsidy for processing of planning applications over a two year period, resulting in an
estimated increase in revenue of $1 million in FY18.
Attachments:
Attachment A: Resolution Amending Municipal Fee Schedule (PDF)
Attachment B: City of Palo Alto User Fee Study Report 1-20-16 (PDF)
Attachment C: February 2, 2016 Finance Committee Minutes (DOC)
Not Yet Approved
160216 jb 0131507 1 February 2016
Resolution No. ____
Resolution of the Council of the City of Palo Alto Amending the Fiscal
Year 2017 Municipal Fee Schedule for Cost of Services Fee Increases
and Hourly Adjustments For Planning Entitlements and Related Services
R E C I T A L S
A. The Department of Planning & Community Environment charges user fees to
applicants requesting planning entitlements and related services.
B. While these fees have been annually adjusted across the board based on inflation
factors, it has been at least five years since they have been subject to a full evaluation based on
the cost of providing services.
C. In 2015, the City performed a Cost of Service Study to evaluate whether the full
cost of providing services. As a result of the Cost of Service Study the City desires to modify
some of the PCE fees.
D. In accordance with the provisions of Chapter 8 of Division 1, of Title 7,
commencing with Section 66016 of the Government Code, as applicable, the Council did on
March 28, 2016, hold a public hearing on the proposed amendments to the Municipal Fee
Schedule, after publication of notice and after availability of the data supporting the
amendments was made available to the public at least 10 days prior to the hearing.
NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. The Council of the City of Palo Alto adopts the changes to the Municipal Fee
Schedule as set forth in Exhibit "A" and “B” and incorporated here by reference. When
effective, such fees shall supersede any prior inconsistent fees charged by the Planning and
Community Environment Department.
SECTION 2. The amount of the new or increased fees and charges is no more than
necessary to cover the reasonable costs of the governmental activity, and the manner in which
those costs are allocated to a payer bears a fair and reasonable relationship to the payer's
burden on, or benefits received from, the governmental activity.
SECTION 3. Fees in the Municipal Fee Schedule are for government services provided
directly to the payor that are not provided to those not charged. The amount of this fee does
not exceed the reasonable costs to the City of providing the services. Consequently, pursuant to
Art. XIII C, Section l(e)(2), such fees are not a tax.
SECTION 4. Effective Date. Pursuant to Government Code Section 66017, all Planning
Department fees relating to a "development project" as defined in Government Code Section
66000 shall become effective no sooner than sixty (60) days from the date of adoption. The fee
Not Yet Approved
160216 jb 0131507 2 February 2016
increases proposed for FY 2017 described in Exhibit A and the changes to the hourly billing
rates described in Exhibit B shall go into effect on July 1, 2016. The fees increases proposed for
FY 2018 described in Exhibit A shall go into effect on July 1, 2017.
SECTION 5. CEQA. The Council of the City of Palo Alto hereby finds that this is not a
project under the California Environmental Quality Act and, therefore, no environmental impact
assessment is necessary.
INTRODUCED and PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
____________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________
Senior Asst. City Attorney City Manager
____________________________
Director of Planning and Community
Environment
____________________________
Director of Administrative Services
*Reflects total estimated cost of providing the service uness noted with a +
Fee Title Current Fee Fee Proposed for FY 2017 *Fee Proposed for FY 2018 *
Architectural ReviewArchitectural Review Major
Project
Note: 100 percent of processing costs
will be recovered plus any
Environmental Impact Assessment and
any other entitlements necessary to
complete the project, whether indicated
as 100 percent cost recovery in this
schedule or not.
$3,846 initial deposit plus Legal Review
fees and applicable Other Application
fees
$10,264 initial deposit plus legal review
fees and applicable Other Application
fees
---
Architectural Review - Minor
Project (ARB Review)$3,000 plus applicable Other
Application fees
$4,982 plus applicable Other Application
fees +
$6,860 plus applicable Other Application
fees
Architectural Review - Minor
Project (Staff Review)$1,500 plus applicable Other
Application fees
$2,112 plus applicable Other Application
fees +
$2,672 plus applicable Other Application
fees
Design Enhancement Exception
$1,642 plus applicable Other
Application fees
$3,623 plus applicable Other
Application fees +
$5,544 plus applicable Other
Application fees
Preliminary Review
$1,247 plus applicable Other
Application fees
$3,371 plus applicable Other
Application fees +
$5,451 plus applicable Other
Application fees
Signs - (ARB Review)$996 plus applicable Other Application
fees
$2,261 plus applicable Other Application
fees +
$3,491 plus applicable Other Application
fees
Signs - (Exceptions)$1,500 plus applicable Other
Application fees
$2,653 plus applicable Other Application
fees +
$3,753 plus applicable Other Application
fees
Signs Erected Without Approval
$1,992 plus applicable Other
Application fees
DELETE - this is a code enforcement
penalty
DELETE - this is a code enforcement
penaltySigns, Minor Facade Changes,
Landscaping, Accessory
Structures, or Similar Minor
Changes to a Building Exterior -
(Staff Review)/Master sign
program
$372 plus applicable Other Application
fees
$611 plus any applicable Other
Application fees +
$835 plus any applicable Other
Application fees
Temporary Sign Permit $63 per 15 days plus applicable Other
Application fees
$110 per 15 days plus any applicable
Other Application fees +
$154 per 15 days plus any applicable
Other Application fees
Comprehensive Plan Change
Comprehensive Plan Change
Note: 100 percent of processing costs
will be recovered plus any
Environmental Impact Assessment and
any other entitlements necessary to
complete the project, whether indicated
as 100 percent cost recovery in this
schedule or not
$6,118 initial deposit plus Legal Review
fees $6,118 initial deposit ---
Comprehensive Plan
Maintenance Fee
Note: Collected at Building Permit
issuance.
$0.55 per $1,000 of construction
valuation
$0.55 per $1,000 of construction
valuation ---
Planning and Community Environment
Exhibit A
* Reflects total estimated cost of providing the service uness noted with a +
Fee Title Current Fee Fee Proposed for FY 2017 *Fee Proposed for FY 2018 *
Development Agreement
Development Agreement
Note: 100 percent of processing costs
will be recovered plus any
Environmental Impact Assessment and
any other entitlements necessary to
complete the project, whether indicated
as 100 percent cost recovery in this
schedule or not.
$7,058 initial deposit plus Legal Review
fees and applicable Other Application
fees
$7,058 initial deposit plus Legal Review
fees and applicable Other Application
fees
---
Development Agreement -
Annual Review
Note: 100 percent of processing costs
will be recovered.
$2,471 initial deposit plus Legal Review
fees and applicable Other Application
fees
$2,471 initial deposit plus Legal Review
fees and applicable Other Application
fees
---
Development Projects Preliminary Review
Development Projects -
Prescreening (PTC & CC Review)
Note: 100 percent of processing costs
will be recovered plus any Environmental
Impact Assessment and any other
entitlements necessary to complete the
project, whether indicated as 100
percent cost recovery in this schedule or
not.
$3,671 initial deposit plus Legal Review
fees and applicable Other Application
fees
$3,671 initial deposit plus Legal Review
fees and applicable Other Application
fees
---
Director's Approval
Home Improvement Exception $996 plus applicable Other Application
fees $2,070 +$3,109
Neighborhood Preservation
Zone Exceptions
$2,304 plus applicable Other
Application fees plus Environmental
Impact Assessment fees
$3,861 +$5,337
Director's hearing requested -
per hearing NEW $1,186 +$2,372
Documents and Photocopies
Administrative Extensions and
Zoning Letters $168 per hour/one-hour minimum Applicable hourly rate/1 hr. mininum ---
Comprehensive Plan $90 plus $4 if mailed $90 plus $4 if mailed ---
Copy from Optical Disk $28 minimum plus $0.50 per page $28 minimum plus $0.50 per page ---
Tree Manual or Other Bounded
Documents $33 plus $4 if mailed $33 plus $4 if mailed ---
Zoning Map Booklet $98 plus $4 if mailed $98 plus $4 if mailed ---
Property Research requiring
more than 30 minutes NEW Applicable hourly rate/1 hr. mininum ---
Environmental Impact Assessment
CEQA Categorical Exemption $336 each $400 +$451
Environmental Impact
Assessment - Mitigated Negative
Declaration
$3,428 plus Legal Review fees
Initial deposit of 100 percent of estimated
costs due upon application plus 25% for
contract administration and applicable
Legal Review and Other Application fees
Environmental Impact
Assessment - Negative
Declaration
$1,801 plus applicable Other
Application fees
Delete. Incorporated into Environmental
Impact Negative Declaration fee
* Reflects total estimated cost of providing the service uness noted with a +
Fee Title Current Fee Fee Proposed for FY 2017 *Fee Proposed for FY 2018 *
Environmental Document
(Consultant Prepared)
Note: If estimated costs eceed $100,000,
alternative deposit and payment
schedule arrangements may be made at
the discretion of the Director of Planning
and Community Environment. 100
percent of processing costs will be
recovered.
Initial deposit of 100 percent of
estimated costs due upon application
plus Legal Review fees and applicable
Other Application fees
Initial deposit of 100 percent of estimated
costs due upon application plus 25% for
contract administration and applicable
Legal Review and Other Application fees
Environmental Document:
Note: 100 percent of processing costs
will be recovered plus any other
entitlements necessary to complete the
project, whether indicated as 100
percent cost recovery in this schedule or
not.
NEW $5,000 initial deposit plus any applicable
Other Application fees.---
Mitigation Monitoring -
Environmental Impact Report
Note: 100 percent of processing costs
will be recovered, including any charges
for specialized consultants.
$3,671 initial deposit plus applicable
Other Application fees
$3,671 initial deposit plus applicable
Legal Review and Other Application fees ---
Mitigation Monitoring -
Mitigated Negative Declaration
Note: 100 percent of processing costs
will be recovered, including any charges
for specialized consultants.
$1,224 initial deposit plus applicable
Other Application fees
$1,224 initial deposit plus applicable
Legal Review and Other Application fees ---
Historic Resource
Demolition Application for
Historic Buildings
$2,472 plus applicable Other
Application fees $1,001 ---
Historic Resource Review -
Major Project
$3,241 plus applicable Other
Application fees
$1,502 plus any applicable Other
Application fees ---
Historic Resource Review -
Minor Project (Staff Review)
$684 plus applicable Other Application
fees
$855 plus any applicable Other
Application fees +
$1,001 plus any applicable Other
Application fees
Historic Resource Review of
Individual Review Application
$1,986 plus Individual Review fees and
applicable Other Application fees
$250 plus Individual Review fees and
applicable Other Application fees ---
Mills Act Contract - Establish or
Withdraw
Note: 100 percent of processing and
legal costs will be recovered.
$1,835 initial deposit plus Legal Review
fees and applicable Other Application
fees
$1,835 initial deposit plus any applicable
Other Application fees ---
Transfer of Development Rights
Projects
Note: 100 percent of processing costs
will be recovered plus any Environmental
Impact Assessment and any other
entitlements necessary to complete the
project, whether indicated as 100
percent cost recovery in this schedule or
not.
$611 initial deposit plus Legal Review
fees
$611 initial deposit plus any applicable
Other Application fees ---
Williamson Act Contract -
Establish or Withdraw
Note: 100 percent of processing and
legal costs will be recovered plus any
Environmental Impact Assessment and
any other entitlements necessary to
complete the project, whether indicated
as 100 percent cost recovery in this
schedule or not.
$1,929 initial deposit plus Legal Review
fees and applicable Other Application
fees
$1,929 initial deposit plus any applicable
Other Application fees ---
* Reflects total estimated cost of providing the service uness noted with a +
Fee Title Current Fee Fee Proposed for FY 2017 *Fee Proposed for FY 2018 *
Individual Review
Expansion of Existing Two-Story
greater than 150 sq. ft.
$2,878 plus applicable Other
Application fees and any other
entitlements necessary to complete the
project, including historic review
$4,310 plus applicable Other Application
fees and any other entitlements
necessary to complete the project,
including historic review +
$5,641 plus applicable Other Application
fees and any other entitlements
necessary to complete the project,
including historic review
Individual Review - Minor
Revisions to Approved Projects
$1,652 plus cost of notices $2,320 plus cost of notices +$2,931 plust cost of notices
New Two-Story Addition or New
Two-Story Home
$4,166 plus applicable Other
Application fees and any other
entitlements necessary to complete the
project, including historic review
$5,679 plus applicable Other Application
fees and any other entitlements
necessary to complete the project,
including historic review +
$7,046 plus applicable Other Application
fees and any other entitlements
necessary to complete the project,
including historic review
Preliminary Individual Review
with Architect $112 $245 +$375
Legal Review Fees
Legal Review for Additional
hearings
Note: Legal review fees cover up to 3
public hearings. Additional hearings are
charged at 1/3 of the applicable fee.
NEW Additional hearings are charged at 1/3 of
the applicable fee.---
Request for Hearing by Planning
& Transportation Commission $280 $280 +---
Appeal costs exceeding appeals
filing fee
Note: Appeal costs exceeding appeals
filing fee will be fully cost recovered
from project applicant.
NEW $3,000 initial deposit plus any applicable
Other Application fees.---
Legal Review - Appeal to City
Council NEW $3,457 +$6,914
Legal Review ARB Major NEW $2,606 +$5,211 Legal Review (legislative review,
zone change, plan amendment,
etc.)
NEW $5,003 +$10,006
Legal Review Complex Projects
over 50,000 sq. ft.
Note: 100 percent of legal services and
costs incurred relating to complex
matters requiring specialized legal
services or documents will be recovered.
$1,680 initial deposit Delete. Incorporated in the specific
Planning fee for the service.---
Legal Review Comprehensive
Plan Change $1,121 Delete. Incorporated into Comprehensive
Plan Change fee.---
Legal Review Demolition
Application for Historic Buildings $1,680 Delete. Incorporated in Demolition
Application for Historic Buildings fee.---
Legal Review Development
Agreement
Note: 100 percent of legal services and
costs incurred will be recovered.
$5,603 initial deposit Delete. Incorporated in Development
Agreement fee ---
Legal Review Development
Agreement - Annual Review $840 Delete. Incorporated into Development
Agreement - Annual Review fee.---
Legal Review Development
Projects Preliminary Review $840 Delete. Incorporated into Development
Project Preliminary Review fee.---
Legal Review Environmental NEW $4,720 +$9,439
* Reflects total estimated cost of providing the service uness noted with a +
Fee Title Current Fee Fee Proposed for FY 2017 *Fee Proposed for FY 2018 *
Legal Review Environmental
Impact Report $2,241 Delete. Incorporated into Environmental
Document fee.---
Legal Review Historic Resource -
Major Project $1,121 Delete. Incorporated into Historic
Resource Review - Major Project fee.---
Legal Review Major Subdivision -
Tentative Map $2,241 Delete. Incorporated into Major
Subdivision - Tentative Map fee.---
Legal Review Mills Act Contract -
Establish or Withdraw
$2,241 Delete. Incorporated in Mill Act Contract -
Establish or Withdraw fee.---
Legal Review Minor Subdivision -
Preliminary Parcel Map
$560 Delete. Incorporated in Preliminary Parcel
Map fees.---
Legal Review Minor Subdivision -
Preliminary Parcel Map with
Exception
$1,121 Delete. Incorporated into Preliminary
Parcel Map with Exception fee.---
Legal Review Mitigation
Monitoring Report $1,121 $500 ---
Legal Review Mitigation
Monitoring - Mitigated Negative
Declaration
$560 Delete. Incorporated into Mitigation
Monitoring Negative Declaration fee.---
Legal Review Non-conforming
Use Exception $1,121 Delete. Incorporated into Use Permit
fees.---
Legal Review Planned
Community Zone Change $2,241 Delete. Incorporated in Planned
Community Zone Change fee.---
Legal Review Planned
Community Zone Change -
Minor Change
$840
Delete. Incorporated in Planned
Community Zone Change - Minor Change
fee.
---
Legal Review Site and Design
Fee $1,401 Delete. Incorporated into Site and Design
fee.---
Legal Review Variance -
Commercial & Manufacturing
$840 Delete. Incorporated into other Variance
fees.---
Legal Review Williamson Act
Contract - Establish or Withdraw
$1,680 Delete. Incorporated into Williamson Act
Contract - Establish or Withdraw fee.---
Legal Review Zone Change -
Regular $1,401 Delete. Incorporated into Zone Change -
Regular fee.---
Legal Review Transfer of
Development Rights Projects $1,121 Delete. Incorporated into Transfer of
Development Rights fee.---
* Reflects total estimated cost of providing the service uness noted with a +
Fee Title Current Fee Fee Proposed for FY 2017 *Fee Proposed for FY 2018 *
Other Application Fees
Public Noticing - 150 ft. Radius
Note: If noticing is required. Covers cost
of up to three rounds of noticing.
$125 per occurrence $484 +$529
Public Noticing - 600 ft. Radius
Note: If noticing is required. Covers cost
of up to three rounds of noticing.
$697 per occurrence $825 +$927
Public Noticing beyond 600 ft.
Radius
Note: If noticing is required
NEW $931 +$1,236
Record Management Fee $26 per file $26 per file ---
Recording Fee with County County cost of recording, if required County cost of recording, if required ---
Records Retention $4.00 per plan sheet $4.00 per plan sheet ---
Technology Enhancements $20 per application Delete. Replaced by Citywide Tech
Fee ---
Pre-screening fee
Note: All costs will be recovered for the
prescreening of applicants proposing
rezoning, zoning text amendments,
development agreements, Comp Plan
amendments, or specific plans.
NEW $3,000 initial deposit plus any applicable
Legal Review and Other Application fees ---
Planning Compliance Fee
Note: 100 percent of processing costs
will be recovered plus any
Environmental Impact Assessment and
any other entitlements necessary to
complete the project, whether indicated
as 100 percent cost recovery in this
schedule or not.
NEW Initial deposit equal to 3 hrs of applicable
staff rate ---
Contract Administration
Note: 25% Contract Administration and
project management costs are in
addition to direct cost of consultant
services and will be charged to deposit-
based fees.
NEW 25% of direct cost ---
Site & Design
Site and Design Major
Note: 100 percent of processing and
legal costs will be recovered plus any
Environmental Impact Assessment and
any other entitlements necessary to
complete the project, whether indicated
as 100 percent cost recovery in this
schedule or not.
$6,118 initial deposit plus any Legal
Review fees and applicable Other
Application fees
$22,523 initial deposit plus any Legal
Review fees and applicable Other
Application Fees
---
Subdivision - Five or More Parcels
Subdivision Final Map $3,491 plus applicable Other
Application fees
$4,140 plus any applicable Other
Application fees +
$4,663 plus any applicable Other
Application fees
Tentative Map
Note: 100 percent of processing costs
will be recovered plus any Environmental
Impact Assessment and any other
entitlements necessary to complete the
project, whether indicated as 100
percent cost recovery in this schedule or
not.
$6,118 initial deposit plus Legal Review
fees and applicable Other Application
fees
$8,622 initial deposit plus any applicable
Other Application fees ---
Subdivision (Minor)
* Reflects total estimated cost of providing the service uness noted with a +
Fee Title Current Fee Fee Proposed for FY 2017 *Fee Proposed for FY 2018 *
Parcel Map $1,116 plus applicable Other
Application fees
$2,527 plus any applicable Other
Application fees +
$3,899 plus any applicable Other
Application fees
Preliminary Parcel Map, Minor
$2,711 plus Legal Review fees and
applicable Other Application fees plus
Environmental Impact Assessment fees
$3,738 plus any applicable Other
Application fees and Environmental
Impact Assessment fees +
$4,671 plus any applicable Other
Application fees and Environmental
Impact Assessment fees
Subdivision (Minor) with Exceptions
Parcel Map, Minor with
Exception
$1,296 plus applicable Other
Application fees
$2,098 plus any applicable Other
Application fees +
$2,855 plus any applicable Other
Application fees
Preliminary Parcel Map, Minor
with Exception
$5,351 plus Legal Review fees and
applicable Other Application fees plus
Environmental Impact Assessment fees
$6,464 plus any applicable Other
Application fees and Environmental
Impact Assessment fees +
$7,388 plus any applicable Other
Application fees and Environmental
Impact Assessment fees
Subscriptions
Board or Commission Agendas $112 annually per board or commission $112 annually per board or commission ---
Board or Commission Minutes $224 annually per board or commission $224 annually per board or commission ---
* Reflects total estimated cost of providing the service uness noted with a +
Fee Title Current Fee Fee Proposed for FY 2017 *Fee Proposed for FY 2018 *
Use Permit
Day Care Center
$186 plus applicable Other Application
fees plus Environmental Impact
Assessment fees
$992 plus any applicable Other
Application fees plus Environmental
Document fees +
$1,793 plus any applicable Other
Application fees plus Environmental
Document fees +
Minor Change to Existing $996 plus applicable Other Application
fees Delete. Captured in other use permit fees. ---
Regular Use Permit
$3,936 plus applicable Other
Application fees plus Environmental
Impact Assessment fees
Delete. Captured in other use permit fees. ---
Temporary Use Permit - Minor
Note: Does not include hearing.
$197 plus applicable Other Application
fees
$674 plus any applicable Other
Application fees +
$1,143 plus any applicable Other
Application fees
Conditional Use Permit -
Director level NEW $4,914 plus any applicable Other
Application fees +
$5,754 plus any applicable Other
Application fees
Conditional Use Permit -
additional upon hearing request
NEW $4,650 plus any applicable Other
Application fees +
$9,645 plus any applicable Other
Application fees
Use Permit for Alcoholic
Beverage Service Only
$996 plus applicable Other Application
fees Delete. Captured in other use permit fees. ---
Wireless Facilities
Note: 100 percent of costs will be
recovered.
$3,921 initial deposit plus Legal Review
fees, Entitlement, and Other Application
fees
Delete. Tiered fees replace this fee.---
Wireless - Tier 1: Minor AR NEW $2,672 plus any applicable Other
Application fees ---
Wireless - Tier 2: Conditional
Use Permit NEW $5,754 plus any applicable Other
Application fees ---
Wireless - Tier 3: Major ARB NEW $6,109 plus any applicable Other
Application fees ---
Variance
Commercial & Manufacturing
Variance
$5,323 plus Legal Review fees and
applicable Other Application fees plus
Environmental Impact Assessment fees
Delete. This is incorporated into other
Variance fees ---
Variance - Director's level NEW $3,144 plus any applicable Other
Application fees +
$3,675 plus any applicable Other
Application fees
Variance - additional upon
hearing NEW $4,823 +$9,645
Fence Variance $1,236 plus applicable Other
Application fees
Delete. This is incorporated into other
Variance fees ---
Residential Variance $2,524 plus applicable Other
Application fees
Delete. This is incorporated into other
Variance fees ---
Zone Change
Planned Community Zone
Change
Note: 100 percent of processing and
legal costs will be recovered
$7,341 initial deposit plus Legal Review
fees $7,341 initial deposit ---
Planned Community Zone
Change - Minor Change
Note: 100 percent of processing and
legal costs will be recovered
$1,500 plus Legal Review fees and
applicable Other Application fees $1,500 initial deposit ---
Zone Change Regular
Note: 100 percent of processing and
legal costs will be recovered
$6,118 initial deposit plus Legal Review
fees $6,118 initial deposit ---
Staff Rates Current Hourly Rate Proposed for FY 2017
Administrative Assistant $90.93 $130.87
Administrative Associate I $84.72 $112.19
Administrative Associate II $88.91 $123.62
Administrative Associate III $92.70 $132.50
Assistant Director Planning &
Community Environment $158.09 $292.56
Associate Engineer NEW $177.57
Associate Planner $108.26 $161.83
Building/Planning Technician $94.65 $130.12
Business Analyst NEW $188.78
Chief Planning Official $139.57 $260.15
Chief Transportation Official $139.57 $227.16
City Legal Counsel $206.77 $273.64
Code Enforcement Officer $104.35 $158.53
Code Enforcement Lead NEW $175.56
Coordinator Transit
Management Systems NEW $160.38
Director of Planning and
Community Environment $182.45 $316.95
Management Analyst NEW $168.48
Planning Manager $125.82 $205.91
Planner $113.23 $169.62
Project Engineer NEW $208.21
Senior Assistant City Attorney $171.78 DELETE. Replaced with one hourly
Legal Counsel rate
Senior Management Analyst NEW $195.46
Senior Planner $125.17 $195.61
Hourly cost recovery rates *
Exhibit B
City of Palo Alto, California January 2016
Capital Accounting Partners 1
The City of Palo Alto
Report – User Fee Study
Capital Accounting Partners, LLC
January 2016
ATTACHMENT B
City of Palo Alto, California January 2016
Capital Accounting Partners 2
CONTENTS
Introduction And Scope ................................................................................................................................ 3
Summary of Costing Methodologies............................................................................................................. 3
Driver Based Costing Models ................................................................................................................ 3
Summary of Results ...................................................................................................................................... 7
Summary of Results .................................................................................................................................. 7
Actual Revenues vs. Projections of Revenues........................................................................................... 7
Calculating Productive Hourly Rates ............................................................................................................. 7
Results for the Planning and Community Environment Department ........................................................... 8
Summary ................................................................................................................................................... 8
General Observations of PCE ................................................................................................................ 9
Cost of Consultants ................................................................................................................................. 11
Appeals:................................................................................................................................................... 11
Services for Individual Homeowners: ..................................................................................................... 11
Comparison Review .................................................................................................................................... 12
Planning Fee Comparisons .................................................................................................................. 13
Observations and Recommendations ......................................................................................................... 14
General Observations ............................................................................................................................. 14
Adjusting the Fee Schedule ..................................................................................................................... 14
Section V: Planning Fee Table ..................................................................................................................... 15
City of Palo Alto, California January 2016
Capital Accounting Partners 3
INTRODUCTION AND SCOPE
As part of its effort to manage its financial resources wisely, the City of Palo Alto engaged Capital
Accounting Partners to prepare a detailed cost analysis of some Planning and Community Environment
(PCE) Department and Development Services user fees. The City's objectives for the study were to
ensure that the City is fully accounting for all of its costs and recovering adequate revenues to reimburse
the City for its expenses.
The scope of this study included the following:
Reviewing the Planning and Development Services current fee schedules;
Interviewing key City staff from relevant departments;
Calculating the total cost of fee generating services;
Analyzing cost recovery levels for fee generating services;
Developing costing models that reflect the most update organizational structure;
Reviewing the results with staff;
Surveying other cities;
Developing a fee schedule that fully accounts for the large range of services that Planning and
Development Services provide; and
Providing recommendations or methodologies on how to adjust fees annually.
The process used for collecting and analyzing the data required active participation by the City’s
management and staff. We want to take this opportunity to recognize their participation, time, and
effort to collect the data and discuss the analysis, results, and recommendations.
Note: since the analytical phase of this study was completed, Development Services engaged Capital
Accounting Partners to conduct a more thorough and detailed studies of its cost and revenues. The
results of which will be addressed at a later time and in preparation to the department becoming an
enterprise fund.
SUMMARY OF COSTING METHODOLOGIES
DRIVER BASED COSTING MODELS
Developing driver based costing models is a detailed and robust method of calculating the cost of a
specific service. It is based on the principles of activity based costing so it seeks to understand cost at an
operational level. This means it relies on understanding the time staff invests in core business processes
to provide fee and non-fee services. This provides the ability to understand staff time and cost as each
staff position participates in providing fee services. Graphically, the following figure illustrates this
methodology.
City of Palo Alto, California January 2016
Capital Accounting Partners 4
Hypothetical Illustration of a Drive Based Costing Model
Step 1: Collect Data – This first step involves discussions with staff to identify those positions within
each department that provide and support direct services. It also involves collecting departmental
budget and expenditure data, identifying the salary and benefits for each position, and identifying non-
personnel expenditures, as well as any departmental and City wide overhead. Specifically, the steps
involve the following:
Identifying staff positions – This includes identifying both position titles and names.
Calculating the number of productive hours – For each position, vacation time, sick leave, paid
holidays, professional development (training), routine staff meetings, and daily work breaks are
deducted from the standard 2,080 annual hours. The result is a range of hours available for each
position on an annual basis. This range is typically 1,400 to 1,600 hours. Factors that influence
this range are length of service with the jurisdiction and local policies for holiday and personal
leave time.
Identifying and allocating non-personnel costs – Costs for materials and supplies are allocated
to the salary and benefits for each position.
Assigning any other expenses that are budgeted in other areas – There are often expenses that
should be included with the total cost of services. Examples of such costs might include
amortized capital expenses for vehicles and technology.
Contributing Staff Process Steps Fee
Planning Tech Application Intake
Initial Application
Review
Review Application for
Conditions Approval
Prepare Report for
Planning Commission
Planner I
Planner II
Planning Director
Site Plan Review
City of Palo Alto, California January 2016
Capital Accounting Partners 5
Identifying core business processes or activities – This step also involves discussions with staff
to understand, at an operational level, the work of the operating unit. Core business processes
used to provide services are identified and then defined by the tasks that are involved.
Processes are also organized by direct and indirect categories:
Direct processes and activities – Those processes that directly contribute to the processing of
an application or permit are first identified. Examples of a direct activity are electrical building
inspection, application intake, and pre-application review.
Indirect processes and activities – Those processes that support, but do not directly apply to the
processing of a specific application or permit. An example of an indirect activity is customer
service or staff training to maintain certifications. Most jurisdictions highly value customer
service, but it is difficult to assign a specific cost or unit of time to an individual service.
Step 2: Building cost structures – This second step involves significant interaction with staff and the
development of time estimates for both direct and indirect processes in each department. Specifically,
this step is at the core of the analysis. There are four processes that comprise this step:
Gathering time estimates for direct processes – By interviewing staff in individual and group
meetings, an estimate of time was assigned to each service by the process that is indicated. For
example, in processing planning fees the following specific steps are involved in the processing of
these fees:
Application intake;
Application completion review; and
Application processing which may include the activities of reviewing applications for code
conformance, preparing CEQA documents and staff reports, attending public hearings, and
developing conditions of approval.
In this analysis, staff time is estimated and assigned to each step. The sum of all the process steps is
the total time that is required to provide that specific service.
Assigning indirect and annual process time – An annual time estimate is gathered from staff for
those indirect or support processes in which they are involved. These may include activities such as
program administration, customer service, and department administration. These costs are
allocated to all services proportionately to all services provided by the department.
Calculating fully loaded hourly rates and the cost of service – Once the total time for each direct
and indirect service is estimated, the cost of service is calculated by using the fully loaded hourly
rates for each staff member or position that is involved with the service. The fully loaded hourly
rate for each employee is based on the employee's salary and benefit costs plus a share of non-
personnel and City overhead costs divided by the employee's available work hours (i.e. 2,080 hours
minus all leave hours). Thus, the direct and indirect cost by activity also includes departmental and
citywide overhead as well as non-labor costs. The source of City indirect costs and non-personnel
costs is from the annual budget or cost allocation that has been established by the City.
Gathering activity or volume data – A critical element in the analysis is the number of times a given
service is provided on an annual basis. This is critical data for three reasons:
It allows a calculated projection of current revenue based on current prices. This is compared
with actual revenue to see if there is a close match as the data should match.
It allows for a calculated projection of revenue at full cost. This is compared to actual
expenditures to see if there is a close match as the data should match.
City of Palo Alto, California January 2016
Capital Accounting Partners 6
It allows for a calculation of total hours consumed. Hours consumed must closely match actual
hours available.
If any of the three calculations do not approximate actual numbers, then time estimates and/or volume
data need to be re-evaluated. These are critical quality checks for costing accuracy.
Step 3: Calculating the full cost of services – This third step calculates the full cost of service for each
direct service in a department. In the previous step, the cost of service was calculated for each direct
and indirect service. In this step, the cost layers are brought together to establish the full cost of service
for a specific direct service, program, or activity. As previously mentioned the cost of each direct service
is calculated. To determine the full cost of service, the cost of indirect services is allocated to each direct
service. The indirect services costs are allocated to each direct service based on each direct services
proportion of labor spent processing each permit and application. By summing the direct and allocated
indirect costs and multiplying that by the activity data, a total cost of service is calculated for both an
individual service and the operating unit as a whole.
The following figure illustrates an example of these calculations.
Hypothetical Illustration of Calculating the Cost of a Single Fee (service)
Step 4: Set fees
Based on any new, existing, or revised cost recovery policies, the recommended fees can be established.
The recommended fees will be established based on City staff recommendations and Council discussion
in the future. The fee analyses in this report are based on full cost recovery.
Application or Fee Title
Signing Programs (Five or More Signs)
Community
Development
Director
Planning
Manager
Associate
Planner
Executive
Assistant Totals
Pre-submittal meeting 0.5 0.5 1
Land Use Application Intake 0.25 0.25 0.25 0.75
Application Review 1 6.5 7.5
Development Review Committee (DRC)0.5 2 2.5
Prepare for decision 0.5 1.25 5 1 7.75
Public hearing 0.33 0.33 2 0.33 2.99
Plan Check of accepted plans – post entitlement 1.25 0.5 1.75
Total Time by Position 0.83 3.83 17.50 2.08 24.24
Calculated Full Loaded Hourly Rate 203.67 183.96 152.38 128.66
Total Direct Cost by Position 169 705 2,667 268 3,808
Total support or indirect costs assigned 574$
Total Cost Assigned 4,382$
Assigning Staff Cost and Time
City of Palo Alto, California January 2016
Capital Accounting Partners 7
SUMMARY OF RESULTS
SUMMARY OF RESULTS
In general, our results show significant opportunity for additional cost recovery. Given that this is the
first formal review of fees in many years, we would expect this. Our general recommendation is that
user fees be updated annually but then a robust review be completed every 3-5 years. We find that
changes in regulations, operating procedures and staffing can change significantly during this time
frame.
ACTUAL REVENUES VS. PROJECTIONS OF REVENUES
One of our checks for quality data is to compare our projections of revenues against actual revenues.
Our projections of revenues are based on a simple formula: # of times a fee is processed X the current
price of that fee. Since we were doing the analysis mid-way through the fiscal year we were using actual
activity data based on the first six months and extrapolating out for twelve months. However, it should
be noted that we use the projections of activity data for two reasons:
1. Predict annual revenue at the full cost of services; and
2. To make sure we fully account for staff time.
CALCULATING PRODUCTIVE HOURLY RATES
The calculation of productive hourly rates is central to our methodology. Costs incorporated in these
rates include:
1. All salary costs;
2. All benefits costs;
3. Prorated non personnel costs such as services and supplies;
4. Department & division administration (includes cost to administer and manage the department
and specific divisions such as current planning, long range planning, etc;
5. City overhead costs; and
6. Other services such as customer service that is specific to planning applications.
The calculation of productive hours includes reduction in annual hours for:
7. Personnel leave such as vacation or personal leave time;
8. Sick leave;
9. Paid Holidays: and
10. Training and routine staff meetings.
When productive hours are calculated in this way, we typically see 1400 – 1600 productive hours on an
annual basis.
City of Palo Alto, California January 2016
Capital Accounting Partners 8
RESULTS FOR THE PLANNING AND COMMUNITY
ENVIRONMENT DEPARTMENT
The Planning and Community Environment (PCE) Department provides a breadth of services for the City
of Palo Alto. Among these are both current and long range planning, transportation planning and code
enforcement. Many of these services are not fee supported nor are they intended to be. For example
Transportation and Code Enforcement are not fee support although Transportation may contribute
costs to a Current Planning fee. To the extent that a group such as Transportation contributes cost to a
Planning fee, these costs were captured. In addition, there are Planning fees that are seldom fully
recovered such as Appeal fees. It is highly unlikely that the Department can or should fully recover the
cost of Appeals.
The principle objectives for this phase of the project were:
1) Calculate the full cost of processing current planning applications; and
2) Compare selected fees and projects with designated benchmark cities in the area.
SUMMARY
Based on Fiscal 15 costs, the Current Planning Division is currently under recovering its costs by an
estimated $851,653. These revenues are exclusive to the processing of Current Planning applications
and does not represent any projected sources of revenues other than these. As the following chart
illustrates, if fees were to be brought to full cost recovery the Division would generate approximately
$1,899,741. This compares with our projection of current revenue of $1,048,089. As noted above, these
projections are based on a simple formula: Total cost assigned to each fee X the number of times the fee
is projected to be processes in a year. The results for each fee are then added to arrive at an annual
projection of revenue.
There are several reasons why the City is failing to fully recover its cost for processing current planning
applications. Among these are:
1) Hourly rates that are charged to time & material fees are only sufficient to cover direct labor
costs but largely insufficient for materials & services, City overhead, Department or Division
overhead, or customer service functions;
2) Fees have not been revised for several years and therefore, they have just not kept pace with
either regulatory changes or total PCE costs;
3) Charging time to deposit accounts by groups external to the basic planning function has not
been as thorough as possible; and
4) It just takes longer to process applications than current fees reflect.
Annual
Revenue at
Full Cost
Recovery
Annual Revenue
at Current Fee
Level
Annual
Difference
$1,899,741 $1,048,089 ($851,653)
FNOTE: THESE DATA HAVE BEEN UPDATED TO REFLECT FISCAL 2016 COSTS
IN THE REPORT TABLE
City of Palo Alto, California January 2016
Capital Accounting Partners 9
GENERAL OBSERVATIONS OF PCE
We have observed the complex and demanding nature of the PCE Department. Its services are under
high review by both the public and by regulatory authorities and the very nature of this creates
challenges. Furthermore, the recent split of Development Services into its own department creates
additional challenges as its budget and structure stabilizes. Furthermore, it provides a breadth of
services including:
Current planning;
Advanced planning;
Transportation planning;
Code Enforcement; and
Building permit review.
While it goes beyond the scope of this project to provide an assessment of the organization and its
structure, we do find an opportunity to simplify some of the challenges. (These opportunities may even
be minor in the overall challenges facing the PCE.) Our observation is that the split funding of PCE staff
with Development Services may be adding to the challenges facing both organizations.
While we understand the logic of split funding staff positions between the two organizations and we
also observe continuing discussions on how to improve the split funding methodology. This appears to
be the continuing and ongoing process off improving the workflow of the two organizations.
In our view a simpler approach to the split funding of individuals and positions is to setup clear
allocations of cost that are simple and verifiable. For example:
Code Enforcement (CE). Instead of split funding CE staff between the two organizations, keep all of
them in the PCE but then allocate costs to Development Services based on the number of cases. For
example, if the total cost of the CE function is $500,000 and 10% of the CE cases is related to
enforcement of building codes than allocate 10% ($50,000) to Development Services. This removes the
debates over split funding.
Code Compliance. Reviewing construction projects for code compliance and prior approval is an
important function of any planning organization. While split funding planning staff between current
planning and building & safety organizations is relatively common we have seen other models work that
may reduce the challenges.
Allocate one person or positon to this function (at .30 of an FTE) rather than split three positions
for this purpose (at .1 FTE each).
Establish separate fees within the planning fee schedule that captures code compliance costs.
This will keep code compliance expenses within PCE as well as revenues.
Customer Service (public counter). In our observation, debates over who pays for the public counter or
for customer service are endless. Some agencies say that it is a public benefit so the general fund should
pay for all or some of it. Others give it its own cost center and then charge the cost out to supported
organizations like PCE and Development Services. When the location of the public counter is on city
property the debate is somewhat simplified. The discussion is centered on labor cost. However, when
the counter is in a commercial building and rent is paid, then additional costs are involved and how to
allocate these costs.
City of Palo Alto, California January 2016
Capital Accounting Partners 10
In our view, there is no right or wrong way, nor are there any perfect models for allocating these costs.
However, the model that we have seen that creates the least debate is to allow building and safety to
manage the function but then assign planning staff on a rotational basis to assist those customers with
planning questions. The logic of this model is simple:
The majority of the customers that come to the counter have issues or concerns with
building related functions;
Counter staff spend comparatively more time with building and safety customers while their
support of planning customers is less on a comparative basis, (but not insignificant).
It is usually easier to pay for the counter from building and safety fees as these tend to keep
up with inflation better than planning and/or engineer fees.
In addition, we also observe a smoothness to the operation when counter staff are trained and certified
as Permit Technicians and can provide basic plan review services. This speeds the process of plan review
and permitting by allowing technicians to do simple plan review, thus freeing more experienced staff to
focus on complex projects.
Observations and Considerations in Calculating and Structuring Fee Schedules
Fees are charged when the City provides services that benefit an individual person or organization. For
example a commercial developer wants to develop a piece of property. The value of the City’s time
effort and energy to review the application and issue the permits is primarily received by the developer.
In addition, the State of California prohibits the City from charging more than full cost. While the State
does not determine what is and is not cost, we take the view that full cost means all direct cost of the
application review and/or permitting process, all support costs required to serve the customer (counter
time for example), an allocated amount for Departmental administration, and an appropriate allocation
of Citywide overhead.
The City currently utilizes a fee structure that is fairly common in the San Francisco Bay area – a
combination of both flat fees and time and material (or deposit based) fees that are calculated from
billable hourly rates. Every city manages these differently. Some cities in the area utilize 100% time and
material fees and others have a balance of both. Our bias is to push cities to adopt flat fees wherever
reasonably possible. The reasons for this follow:
Flat fees are easier to administer. Since deposit accounts do not have to be monitored and
adjusted there is far less administrative work involved;
Flat fees are easier to budget for developers; and
In our experience, cities that rely on time and material fees exclusively have very poor records of
cost recovery. This are two primary reasons for this. 1) Hourly rates seldom capture the full cost
(we do not anticipate this being an issue with Palo Alto) and 2) poor time tracking to deposit
accounts.
In our analysis of planning fees and modifying the current fee structure we took every opportunity to
restructure deposit based fees to flat fees wherever reasonable. This was done in conjunction with staff
and planning leadership. In our view of Palo Alto’s Planning fees, as we have structured them, is a
reasonable balance of the two types. They use flat fees where it is reasonable to do so but still retains
the use of deposit based fees for those project that are so complex that a flat fee does not work. In our
view, setting deposits do not need to be in compliance with Prop 218 or AG Opinion 92-506 – which
state that the final fee must aligned with actual cost. A deposit is just the starting point to establish cost.
If cost is less than the deposit then the difference is returned. A deposit is an internal mechanism to
City of Palo Alto, California January 2016
Capital Accounting Partners 11
capture an estimate of cost and then time will be charged to the deposit. Therefore, it is our view that
the deposit should not be written into resolution, even though most cities do this. In our view, staff
need the flexibility to collect a deposit that may be less than or more than what is listed.
The City does however utilize billable or productive hourly rates. As part of our analysis we developed
new rates that fully account for all labor costs and costs associated with services and supplies, City
overhead, and PCE overhead. In addition, these rates also include costs associated with customer
service and program specific administration such as administration of current planning. In summary, we
treated each staff position just like an individual user fee and allocated all costs on the same basis.
In setting user fees for planning services there is often more issues to consider than cost recovery. Many
communities often struggle with two areas: 1) how to price appeals, and 2) how to price fees and
services that are consumed primarily by individuals and individual homeowner.
COST OF CONSULTANTS
The City frequently hires outside consultants for specialty work or to augment staff. We understand that
the practice in recovering consultant cost is to pass the direct cost of their time to the applicant. In our
view. This under recovers cost to the City. We would recommend adding an overhead amount to the
hourly rates charged by consultants, just like actual staff.
APPEALS:
Appeals are often discussed in fee studies and we make every effort to be sensitive to the requirements
of the City. However, we have never seen a City intentionally recover full cost of these services. Our
observations is the city legal counsel has clear opinions on appeals and this does not typically involve full
cost recovery. Therefore, our standard recommendation is to set appeal fees reasonably but not spend
significant project resources on calculating their full cost.
SERVICES FOR INDIVIDUAL HOMEOWNERS:
Services and fees that impact individual homeowners are often the source of concern for cities. The
question usually comes down to this: should we reduce the price for the fee to something less than full
cost? For the services of the City’s Current Planning Division these fees would center on the Individual
review fees. In our view a city has a limited number of options in setting fees:
1. Charge full cost;
2. Subsidize the cost by lowering the price.
It should be noted that the State of California does not allow subsidizing one fee and then raising
another fee above cost to pay for the subsidy. In short, any fee can be priced up to full cost but no more
than full cost.
In our view, fees should be set at full cost unless there is a compelling interest to the City to do
otherwise. These reasons usually include social and economic considerations.
City of Palo Alto, California January 2016
Capital Accounting Partners 12
COMPARISON REVIEW
As part of this analysis, a survey was conducted of comparative fees and projects. We caution the reader
about these comparisons. Many communities do not routinely update their fees, and when they do, it
might not be based on a thorough analysis of cost. This means the data that we are often comparing is
the City’s cost compared to another city’s price.
The challenges of fee comparison can be summarized by the following:
Communities have different policies regarding user fees. Some desire to subsidize their fees
while others want to charge full cost.
Service levels can vary dramatically from one community to the next.
Service descriptions can be very different.
Multiple services will be included in one fee for one community but be separated in another
community.
Pricing structures can vary. Some cities will use flat fees, while others will use a combination of
deposit accounts with time and material charges. It is not unusual to find cities that publicize
deposit fees but never collect anything less or more than the deposit. Nor is it unusual to see
cities publicizing deposits but in reality a planner will estimate the deposit and then charge
against it for full cost recovery.
One city can have one Conditional Use Permit (as an example) while another may have several
types. Similarly, one city may have one Temporary Use Permit while another may have multiple
types that cover a range of potential uses. In addition, some cities may subsidize use permits
based on the occupant.
Therefore, comparing one service that is provided by the City of Palo Alto with the same service for a
neighboring city can be challenging – at best. We urge caution. We advise looking at trends. Do the
trends show high fees, low fees, or fees that are within a reasonable range? In our view, the trends show
about what we would expect - fees that are near the upper end of a range but are, on balance,
reasonably aligned with its benchmark cities.
The selection of benchmark municipalities was made in conjunction with staff. The selection criteria
were primarily municipalities that the City of Palo Alto routinely uses for benchmark purposes.
The following Cities were selected:
San Mateo;
Los Gatos;
Saratoga;
Mountain View;
Redwood City; and
Beverly Hills.
City of Palo Alto, California January 2016
Capital Accounting Partners 13
PLANNING FEE COMPARISONS
The following table provides the results of the comparison study.
Planning Fees Calculated Cost
/ Deposit
Current
Fee/Deposit
levels
San Mateo Los Gatos Saratoga Mountain View Beverly Hills *
AR- Minor Project (staff review only) $ 2,849 $ 1,448
$2,170 deposit plus
actual cost $ 1,791
$2,000 initial
deposit, actual cost $ 2,315 $ 561
Subdivision - Parcel Map $ 3,776 $ 1,077
$719 deposit plus plus
actual cost $ 7,104 N/A $ 1,947 $ 14,232
Conditional Use Permit - Director level $ 5,272 $ 3,799
$2,710 deposit plus plus
actual cost $ 5,074
$2,000 initial
deposit, actual cost $ 3,858 $ 17,227
Temporary Use Permit (TUP) $ 999 $ 190
$576 deposit plus actual
cost N/A
$500 initial
deposit, actual cost $ 368 $ 5,852
Variance - Directors Level $ 3,805 $ 2,436
$1,149 deposit plus
actual cost $ 3,732
$2,500 initial
deposit, actual cost $ 2,457 $ 17,227
Individual Review - New two story residence or addition to existing one story $ 7,866 $ 4,021
$2,934 deposit plus
actual cost $ 4,982
$3,500 initial
deposit, actual cost N/A $ 2,584
N/A - do not issue or nothing comparable.
* Soon to be adopted fees
City of Palo Alto, California January 2016
14
OBSERVATIONS AND RECOMMENDATIONS
GENERAL OBSERVATIONS
We note that the PCE is under recovering their costs. There are several reasons for this:
1) Hourly rates may recover the direct cost of individual staff but are not sufficient to recover the
full costs associated with each work group;
2) Costs for outside consultants are not being marked up to recover department or City overhead;
and
3) More time is required to process individual permits and applications than previously estimated.
ADJUSTING THE FEE SCHEDULE
We recommend annual adjustments to fees wherever possible. We also recommend a complete review
of costs for fee services every three to five years. With the annual update of fees we recommend using a
simple CPI type increase that is attached to the City’s labor cost. For example, if the labor cost for the
City goes up by 2% then adjust each fee by 2%. This is the simplest and most common method of
adjusting fees annually. It is our observation that the regulatory requirements change enough within a
three to five year time frame that a comprehensive review of costs is then warranted.
We understand that the City’s policy is to adjust fees annually based on changes to salaries and benefits.
We would affirm this practice and find that those cities that do this, maintain better cost recovery levels
over the long term.
City of Palo Alto, California January 2016
Capital Accounting Partners, LLC 15
SECTION V: PLANNING FEE TABLE
City of Palo Alto
Planning Fees
Fee Name Unit / Notes Actual Work
Volume Direct Unit Cost Indirect Unit
Allocated Costs
External
Costs
Total Cost
Assigned
Update to Fiscal
15-16
Current
Fee / Revenue /
Deposit
Unit Surcharge
or (Subsidy)
Based on fiscal
15-16
Annual Revenue
at Full Cost
Recovery
Annual Revenue at
Current Fee Level
Annual
Difference
MISCELLANEOUS PROCESSING FEES 3.5%
Public Notice: 600 foot radius
If noticing is
required, per
occurance 490$ $406 $896 $927.31
$ 673
($254)$0.00 -$ $0.00
Public Notice: 150 foot radius If noticing is
required 279$ $231 $511 $528.63 $ 121 ($408)$0.00 -$ $0.00
Record Management Fee Delete -$ $0 $0 $0.00 $ 25 $25 $0.00 -$ $0.00
Records Retention (microfilming)Delete -$ $0 $0 $0.00 $ 4 $4 $0.00 -$ $0.00
Recording Fee with the County At cost -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Public Notice beyond 600 foot radius If noticing is
required 653$ $541 $1,194 $1,235.86 ($1,236)$0.00 -$ $0.00
Additional noticing beyond 3 -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Pre-screening fee Deposit -$ $0 $0 $0.00 $ 2,500 $2,500 $0.00 -$ $0.00
ARCHITECTURAL REVIEW BOARD -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Preliminary Review 14 2,880$ $2,387 $5,267 $5,451.56 $ 1,204 ($4,248)$76,321.78 16,856.0$ ($59,465.78)
Minor Project (staff review only) – sign and façade changes
only, or similar minor changes.441$ $366 $807 $834.89 $ 359 ($476)$0.00 -$ $0.00
Minor Project (staff review only)114 1,412$ $1,170 $2,582 $2,671.97 $ 1,448 ($1,224)$304,604.51 165,072.0$ ($139,532.51)
Minor Project - Board Review 10 3,624$ $3,004 $6,628 $6,859.60 $ 2,896 ($3,964)$68,596.04 28,960.0$ ($39,636.04)
Major Project Deposit 16 5,422$ $4,495 $9,917 $10,264.37 $ 3,712 ($6,552)$164,229.93 59,392.0$ ($104,837.93)
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Master sign program 1,937$ $1,606 $3,543 $3,667.15 $ 359 ($3,308)$0.00 -$ $0.00
Signs (requiring Board review)1,844$ $1,529 $3,373 $3,491.17 $ 961 ($2,530)$0.00 -$ $0.00
Signs Erected without Approval Code Enf
penalty -$ $0 $0 $0.00 $ 1,923 $1,923 $0.00 -$ $0.00
Sign Exception 1,983$ $1,644 $3,626 $3,753.05 $ 1,448 ($2,305)$0.00 -$ $0.00
Design Enhancement Exception (DEE)2,929$ $2,428 $5,357 $5,544.25 $ 1,585 ($3,959)$0.00 -$ $0.00
Temporary sign permit (15 days)81$ $67 $149 $154.04 $ 61 ($93)$0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
ENVIRONMENTAL ASSESSMENT -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Environmental Impact Assessment (EIA) mitigated/negative
declaration
Consult cost
plus mgt fee -$ $0 $0 $0.00 $ 1,738 $1,738 $0.00 -$ $0.00
Environmental Impact Assessment (EIA)Delete -$ $0 $0 $0.00 $ 3,309 $3,309 $0.00 -$ $0.00
CEQA Categorical Exemption 238$ $198 $436 $451.04 $ 324 ($127)$0.00 -$ $0.00
Environmental Impact Report (EIR)
Deposit (100%
of Estimated
Costs) plus 25%
for project mgt
and overhead 1,322$ $1,096 2,418$ $2,502.43 ($2,502)$0.00 -$ $0.00
Environmental Impact Report (EIR) Legal Review Delete 264$ $219 $484 $500.49 $ 2,163 $1,663 $0.00 -$ $0.00
Mitigation Monitoring (MND) Deposit -$ $0 $0 $0.00 $ 1,181 $1,181 $0.00 -$ $0.00
-$ $0 $0 $0.00 $ 541 $541 $0.00 -$ $0.00
Mitigation Monitoring (EIR)Deposit -$ $0 $0 $0.00 $ 3,543 $3,543 $0.00 -$ $0.00
Mitigation Monitoring (EIR) Legal review 264$ $219 $484 $500.49 $ 1,082 $582 $0.00 -$ $0.00
Legal review - categorical exception class 32 and
mitigated/negative declaration Delete 529$ $438 $967 $1,000.97 ($1,001)$0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
HISTORIC -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Demolition of Historic Building 529$ $438 $967 $1,000.97 $ 2,386 $1,385 $0.00 -$ $0.00
Demolition of Historic Building Legal Review Delete -$ $0 $0 $0.00 $ 1,622 $1,622 $0.00 -$ $0.00
Major Project 2 793$ $658 $1,451 $1,501.46 $ 3,128 $1,627 $3,002.92 6,256.0$ $3,253.08
Major Project Legal Review Delete 6 -$ $0 $0 $0.00 $ 1,082 $1,082 $0.00 6,492.0$ $6,492.00
Minor Project requiring staff level review 8 529$ $438 $967 $1,000.97 $ 660 ($341)$8,007.79 5,280.0$ ($2,727.79)
Historic Review of Individual Review Application 132$ $110 $242 $250.24 $ 1,917 $1,667 $0.00 -$ $0.00
Floor Area Bonus and/or Transfer of Development Rights (TDR)Deposit -$ $0 $0 $0.00 $ 590 $590 $0.00 -$ $0.00
Floor Area Bonus and/or Transfer of Development Rights (TDR) Legal ReviewDelete -$ $0 $0 $0.00 $ 1,082 $1,082 $0.00 -$ $0.00
Minor project requiring Historic Board review ???-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Annual Cost Calculations (Fiscal 15-16)Unit Cost Summary
Capital Accounting Partners Page 1 of 5 Planning Unit Cost Calcs
City of Palo Alto
Planning Fees
Fee Name Unit / Notes Actual Work
Volume Direct Unit Cost Indirect Unit
Allocated Costs
External
Costs
Total Cost
Assigned
Update to Fiscal
15-16
Current
Fee / Revenue /
Deposit
Unit Surcharge
or (Subsidy)
Based on fiscal
15-16
Annual Revenue
at Full Cost
Recovery
Annual Revenue at
Current Fee Level
Annual
Difference
Annual Cost Calculations (Fiscal 15-16)Unit Cost Summary
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
SITE AND DESIGN -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Site and Design - Major Deposit 6 11,898$ $9,863 $21,761 $22,522.91 $ 5,905 ($16,618)$135,137.44 35,430.0$ ($99,707.44)
Site and Design - Major Legal Review Delete 529$ $438 $967 $1,000.97 $ 1,352 $351 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00SUBDIVISION-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Preliminary Parcel Map 2,468$ $2,046 $4,513 $4,671.01 $ 2,617 ($2,054)$0.00 -$ $0.00
Preliminary Parcel Map Legal Review Delete -$ $0 $0 $0.00 $ 541 $541 $0.00 -$ $0.00
Preliminary Parcel Map w/Exception 3,903$ $3,235 $7,138 $7,387.54 $ 5,165 ($2,223)$0.00 -$ $0.00
Preliminary Parcel Map w/Exception Legal Review Delete -$ $0 $0 $0.00 $ 1,082 $1,082 $0.00 -$ $0.00
Parcel Map 8 2,059$ $1,707 $3,767 $3,898.51 $ 1,077 ($2,822)$31,188.12 8,616.0$ ($22,572.12)
Parcel Map w/ Exception 1,508$ $1,250 $2,758 $2,854.46 $ 1,251 ($1,603)$0.00 -$ $0.00
Tentative Map Deposit 2 4,555$ $3,776 $8,330 $8,621.90 $ 5,905 ($2,717)$0.00 11,810.0$ $11,810.00
Tentative Map Legal Review Delete 529$ $438 $967 $1,000.97 $ 2,163 $1,162 $0.00 -$ $0.00
Final Map of Five or More Parcels 2 2,464$ $2,042 $4,506 $4,663.52 $ 3,370 ($1,294)$0.00 6,740.0$ $6,740.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
ZONING ADMINISTRATOR -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Conditional Use Permit (CUP) - Director level 18 3,039$ $2,519 $5,559 $5,753.10 ($5,753)$103,555.80 -$ ($103,555.80)
Conditional Use Permit (CUP) additional upon hearing request 5,095$ $4,224 $9,319 $9,644.84 $ 3,799 ($5,846)$0.00 -$ $0.00
CUP – Wireless Facilities Delete 4,239$ $3,514 $7,754 $8,025.09 $ 3,785 ($4,240)$0.00 -$ $0.00
CUP – Use Permit for alcoholic beverage service only Delete 1,702$ $1,411 $3,113 $3,221.81 $ 961 ($2,261)$0.00 -$ $0.00
CUP – Minor Change to Existing CUP Delete 1,438$ $1,192 $2,629 $2,721.33 $ 961 ($1,760)$0.00 -$ $0.00
CUP - Day Care Center (50% of CUP)1,894$ $1,570 $3,465 $3,586.05 $ 180 ($3,406)$0.00 -$ $0.00
Temporary Use Permit (TUP)No hearing
option 10 604$ $501 $1,104 $1,143.04 $ 190 ($953)$11,430.37 1,900.0$ ($9,530.37)
Variance - directors level 6 1,942$ $1,610 $3,551 $3,675.67 $ 2,436 ($1,240)$22,054.00 14,616.0$ ($7,438.00)
Nonresidential Variance Delete 1,343$ $1,114 $2,457 $2,542.97 $ 5,138 $2,595 $0.00 -$ $0.00
Nonresidential Variance Legal Review Delete -$ $0 $0 $0.00 $ 811 $811 $0.00 -$ $0.00
Variance - additional for hearing 5,095$ $4,224 $9,319 $9,644.84 $ 1,193 ($8,452)$0.00 -$ $0.00
Home Improvement Exception (HIE)6 1,642$ $1,361 $3,004 $3,108.84 $ 961 ($2,148)$18,653.06 5,766.0$ ($12,887.06)
Preliminary Review meeting with Architect 124 118$ $98 146.8 $362 $374.89 $ 108 ($267)$46,486.55 13,392.0$ ($33,094.55)
Individual Review Minor Revisions to approved projects 44 1,548$ $1,284 $2,832 $2,931.13 $ 1,595 ($1,336)$128,969.91 70,180.0$ ($58,789.91)
Individual Review - New Two Story Residence or addition to existing one story 44 3,723$ $3,086 $6,808 $7,046.66 $ 4,021 ($3,026)$310,052.92 176,924.0$ ($133,128.92)
Individual Review - Second Story expansion >150 s.f.2,980$ $2,470 $5,450 $5,641.06 $ 2,778 ($2,863)$0.00 -$ $0.00
Neighborhood Preservation Zone Exception 2,820$ $2,338 $5,157 $5,337.79 $ 2,224 ($3,114)$0.00 -$ $0.00
If a directors hearing is requested (additional)Per hearing 1,253$ $1,039 $2,292 $2,372.39 ($2,372)$0.00 -$ $0.00
Wireless - Tier 1: Minor AR 1,412$ $1,170 $2,582 $2,671.97 ($2,672)$0.00 -$ $0.00
Wireless - Tier 2: Conditional Use Permit 3,039$ $2,519 $5,559 $5,753.10 ($5,753)$0.00 -$ $0.00
Wireless - Tier 3: Major ARB 3,227$ $2,675 $5,902 $6,108.87 ($6,109)$0.00 -$ $0.00
OTHER -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
All Appeals (File with City Clerk)264$ $219 $484 $500.49 $ 136 ($364)$0.00 -$ $0.00
All Appeals (File with City Clerk) Legal Review Delete -$ $0 $0 $0.00 $ 270 $270 $0.00 -$ $0.00
Comprehensive Plan Change (not annual review)Deposit -$ $0 $0 $0.00 $ 5,905 $5,905 $0.00 -$ $0.00
Comprehensive Plan Change (not annual review) Legal Review Delete -$ $0 $0 $0.00 $ 1,082 $1,082 $0.00 -$ $0.00
Development Project Preliminary (pre-screening)Deposit -$ $0 $0 $0.00 $ 3,543 $3,543 $0.00 -$ $0.00
Development Project Preliminary (pre-screening) Legal Review Delete -$ $0 $0 $0.00 $ 811 $811 $0.00 -$ $0.00
Development Agreement Deposit -$ $0 $0 $0.00 $ 6,813 $6,813 $0.00 -$ $0.00
Development Agreement Legal Review Delete -$ $0 $0 $0.00 $ 5,408 $5,408 $0.00 -$ $0.00
Development Agreement Annual Review Deposit -$ $0 $0 $0.00 $ 2,385 $2,385 $0.00 -$ $0.00
Development Agreement Annual Review Legal Review Delete -$ $0 $0 $0.00 $ 811 $811 $0.00 -$ $0.00
Planned Community Zone Change Deposit -$ $0 $0 $0.00 $ 7,086 $7,086 $0.00 -$ $0.00
Planned Community Zone Change Legal Review Delete -$ $0 $0 $0.00 $ 2,163 $2,163 $0.00 -$ $0.00
Minor Change to Planned Community Zone Deposit -$ $0 $0 $0.00 $ 1,448 $1,448 $0.00 -$ $0.00
Minor Change to Planned Community Zone Legal Review Delete -$ $0 $0 $0.00 $ 811 $811 $0.00 -$ $0.00
Zone Change - Regular Deposit 2 -$ $0 $0 $0.00 $ 5,905 $5,905 $0.00 11,810.0$ $11,810.00
Zone Change - Regular Legal Review Delete -$ $0 $0 $0.00 $ 1,352 $1,352 $0.00 -$ $0.00
Williamson Act - Establish or Withdraw Deposit -$ $0 $0 $0.00 $ 1,862 $1,862 $0.00 -$ $0.00
Williamson Act - Establish or Withdraw Legal Review Delete -$ $0 $0 $0.00 $ 1,622 $1,622 $0.00 -$ $0.00
Mills Act – Establish or Withdraw Deposit -$ $0 $0 $0.00 $ 1,771 $1,771 $0.00 -$ $0.00
Mills Act – Establish or Withdraw Legal Review -$ $0 $0 $0.00 $ 2,163 $2,163 $0.00 -$ $0.00
Capital Accounting Partners Page 2 of 5 Planning Unit Cost Calcs
City of Palo Alto
Planning Fees
Fee Name Unit / Notes Actual Work
Volume Direct Unit Cost Indirect Unit
Allocated Costs
External
Costs
Total Cost
Assigned
Update to Fiscal
15-16
Current
Fee / Revenue /
Deposit
Unit Surcharge
or (Subsidy)
Based on fiscal
15-16
Annual Revenue
at Full Cost
Recovery
Annual Revenue at
Current Fee Level
Annual
Difference
Annual Cost Calculations (Fiscal 15-16)Unit Cost Summary
Consult plus project mgt 25%plus direct
cost 100$ $83 $183 $189.30 ($189)$0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
DOCUMENTS & GENERAL FEES -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Administrative extensions and zoning letters Per hour, 1 hr min
-$ $0 $0 $0.00 $ 162 $162 $0.00 -$ $0.00
Property research or research requiring more than 30 minutes Applicable hourly
rate -$ $0 $0 $0.00 $ 123 $123 $0.00 -$ $0.00
Records Retention (microfilming)Per plan sheet -$ $0 $0 $0.00 $ 4 $4 $0.00 -$ $0.00
Comprehensive Plan Plus $4 if mailed
-$ $0 $0 $0.00 $ 87 $87 $0.00 -$ $0.00
Zoning Map -$ $0 $0 $0.00 $ 95 $95 $0.00 -$ $0.00
Comprehensive Plan map (200-scale)Per page,plus $4
if mailed -$ $0 $0 $0.00 $ 13 $13 $0.00 -$ $0.00
Tree Manual or other bound documents
Plus $4 if mailed
-$ $0 $0 $0.00 $ 32 $32 $0.00 -$ $0.00
Subscription – Agendas ( annual)
Per board or
commission -$ $0 $0 $0.00 $ 108 $108 $0.00 -$ $0.00
Subscription – Minutes (annual)Per board or
commission -$ $0 $0 $0.00 $ 216 $216 $0.00 -$ $0.00
Copies – Optical Disk Per page,$27.
min -$ $0 $0 $0.00 $ 0.50 $1 $0.00 -$ $0.00
Photocopies Per page -$ $0 $0 $0.00 $ 0.13 $0 $0.00 -$ $0.00
Planning compliance fee Deposit -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Long range planning 1 1,573,500$ $857,569 $2,431,068 $2,516,155.83 ($2,516,156)$0.00 -$ $0.00
Comprehensive Plan Implementation 2 -$ $0 $0 $0.00 $ 201,298 $201,298 $0.00 402,596.6$ $402,596.56
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Legal review (ARB major)6 3,259$ $1,776 $5,035 $5,211.54 ($5,212)$31,269.23 -$ ($31,269.23)
legal review (legislative review, ie zone change, plan
amendment, etc)16 6,258$ $3,411 $9,668 $10,006.67 ($10,007)$160,106.80 -$ ($160,106.80)
Legal review (environmental)20 5,903$ $3,217 $9,120 $9,439.35 ($9,439)$188,787.05 -$ ($188,787.05)
Note: Legal review fees cover up to 3 public hearings, additional
hearings 1/3 of the applicable fee -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Legal review (appeal to City Council)4,323$ $2,356 $6,680 $6,913.51 ($6,914)$0.00 -$ $0.00
Productive Hourly Rates By Position -$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Administrative Assistant 82$ $45 $126 $130.87 $ 91.96 ($39)$0.00 -$ $0.00
Administrative Associate I 70$ $38 $108 $112.19 $ 84.01 ($28)$0.00 -$ $0.00
Administrative Associate II 77$ $42 $119 $123.62 $ 88.14 ($35)$0.00 -$ $0.00
Administrative Associate III 83$ $45 $128 $132.50 $ 91.87 ($41)$0.00 -$ $0.00
Assistant Director Planning & Community Environment 183$ $100 $283 $292.56 $ 154.03 ($139)$0.00 -$ $0.00
Associate Engineer 111$ $61 $172 $177.57 ($178)$0.00 -$ $0.00
Associate Planner 101$ $55 $156 $161.83 $ 107.21 ($55)$0.00 -$ $0.00
Building/Planning Technician 81$ $44 $126 $130.12 $ 93.79 ($36)$0.00 -$ $0.00
Business Analyst 118$ $64 $182 $188.78 ($189)$0.00 -$ $0.00
Chief Planning Official 163$ $89 $251 $260.15 $ 136.13 ($124)$0.00 -$ $0.00
Chief Transportation Official 142$ $77 $219 $227.16 $ 136.13 ($91)$0.00 -$ $0.00
Code Enforcement Officer 99$ $54 $153 $158.53 $ 103.35 ($55)$0.00 -$ $0.00
Coordinator Transportation System Management 100$ $55 $155 $160.38 ($160)$0.00 -$ $0.00
Director Planning/Community Environment 198$ $108 $306 $316.95 $ 177.59 ($139)$0.00 -$ $0.00
Management Analyst 105$ $57 $163 $168.48 ($168)$0.00 -$ $0.00
Manager Planning 129$ $70 $199 $205.91 $ 122.84 ($83)$0.00 -$ $0.00
Planner 106$ $58 $164 $169.62 $ 112.10 ($58)$0.00 -$ $0.00
Project Engineer 130$ $71 $201 $208.21 $ 129.17 ($79)$0.00 -$ $0.00
Senior Management Analyst 122$ $67 $189 $195.46 ($195)$0.00 -$ $0.00
Senior Planner 122$ $67 $189 $195.61 $ 123.87 ($72)$0.00 -$ $0.00
Senior Project Engineer 130$ $71 $201 $208.28 ($208)$0.00 -$ $0.00
Outside Consultant adjustment 100$ $55 $155 $159.91 55%($159)$0.00 -$ $0.00
City Legal Counsel -$ $0 264.39 $264 $273.64 ($274)$0.00 -$ $0.00
-$ $0 $0 $0.00 $0 $0.00 -$ $0.00
Capital Accounting Partners Page 3 of 5 Planning Unit Cost Calcs
City of Palo Alto
Planning Fees
Fee Name Unit / Notes Actual Work
Volume Direct Unit Cost Indirect Unit
Allocated Costs
External
Costs
Total Cost
Assigned
Update to Fiscal
15-16
Current
Fee / Revenue /
Deposit
Unit Surcharge
or (Subsidy)
Based on fiscal
15-16
Annual Revenue
at Full Cost
Recovery
Annual Revenue at
Current Fee Level
Annual
Difference
Annual Cost Calculations (Fiscal 15-16)Unit Cost Summary
Annual Revenue
at Full Cost
Recovery
Annual Revenue at
Current Fee Level
Annual
Difference
$1,939,661 $1,048,089 ($891,573)
Capital Accounting Partners Page 4 of 5 Planning Unit Cost Calcs
FINANCE COMMITTEE
TRANSCRIPT
Page 1 of 45
Regular Meeting
Tuesday, February 2, 2016
Chairperson Filseth called the meeting to order at 7:00 P.M. in the
Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California.
Present: Filseth (Chair), Holman, Schmid, Wolbach
Absent:
Oral Communications
Chair Filseth: Thank you very much. Welcome to the first meeting of the
Finance Committee in 2016. The first Item on the Agenda is Oral
Communications and members of the public may speak to any Item not on
the Agenda.
Jessica Brettle, Assistant City Clerk: (inaudible).
Agenda Items
1. Recommendation to City Council to Accept the Cost of Services Study
for Planning Fees and Adopt a Schedule for Implementation of Fee
Increases and Adjustments.
Chair Filseth: In that case we will proceed to Action Item 1,
Recommendation to City Council to Accept the Cost of Services Study for
Planning Fees and adopt a Schedule for Implementation of Fee Increases
and Adjustments. The procedure is, if I will get this right, the Staff will
present and then we will have Oral Communications from the public and
then we will have questions and comments and Motions from the Committee
(Finance Committee). Is that right? Very good.
Hillary Gitelman, Director of Planning and Community Environment: I have
the A Team here, Sherry, John, Kara from the City
Attorney’s office. We are all here to answer questions on the proposal
before you, which is to address the user fees that we charge for planning
ATTACHMENT C
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February 2, 2016
activities. So Sherry has a brief presentation and then all the rest of us are
available to answer questions.
Sherry Nikzat, Senior Management Analyst for Planning and Community
Environment: Chair Filseth, members of the Committee, my name is Sherry
Nikzat. I am Senior Management Analyst for the Planning and Community
Environment Department. Tonight we are coming to you with our Cost of
Services Study. Staff is asking me to review the Cost of Services Study and
recommend that the City Council adopt a schedule for Fee Increases and
Adjustments. In 2013 the City undertook a comprehensive Cost of Services
Study due to the complexity of Planning and Development Fees and the
anticipated split at that time of the Planning Department into Planning and
Development Services. Planning Fees were not part of that final Study.
Fees for services or User Fees are charged when providing a service from
which one or more individuals benefit. A key objective of this Study was to
determine the cost of providing these services. It has been at least five
years since the last user fee was done for Planning Fees. The department
brought in a consultant to review our current fees and analyze the cost of
providing these planning services. Another objective was to analyze fees
consistent with City’s adopted Cost Recovery Policy. Council adopted a Cost
Recovery Policy last year, establishing high, medium and low categories of
recovery, and based on that policy, planning activities generally fall within
the group or category for high level of cost recovery. The Study identified
cost of providing service, but it is up to the Council to determine if they wish
to set fees at full cost recovery or something less. Fees cannot be set to
exceed the cost of services and one fee cannot be increased beyond the cost
of service to make up for another one that you wish to set at a lower cost;
however, whether or not the Council wishes to set the fees at a lower rate or
whether to delay Cost Recovery is a Policy decision left to Council. The
Study also looked at the department’s fee structure with an eye to
recommend two types of fees consistent with current work load and to make
them simpler where possible. The two types we currently have in place and
I will talk about that in just a minute. Once costs were determined, Staff’s
objective was to recommend any fee changes and suggest implementation
approaches. The Study identified the amount of time it takes for Staff to
perform directly-related tasks. For Staff time, productive time was
computed for each position, removing unproductive hours, what are
considered unproductive hours of sick leave, vacation, training and the like.
The Study also identified operational costs like our on-call consultants. I
think you are familiar with our on-call consultants, and identified indirect
costs, such as the cost of managers and support Staff as well as City-wide
overhead for the Central Servicing Departments like Administrative Services
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February 2, 2016
Department (ASD), City Manager and the like. The result is the suggested
fee updates and updated hourly Staff rates. Fees for services in the
Planning Department are structured in two ways: Flat Fees and Deposit-
based Fees. Flat Fees cover the cost of providing services for those activities
where the average amount of processing time and effort can be reasonably
determined. Deposit-based Fees are taken when Staff time is expected to
vary widely, as it does with some of the more complex activities. A deposit
amount listed in the Municipal Fee Schedule is collected at the start of the
activity and then costs to deliver those services are drawn down against the
deposit. Staff recommends right sizing both Flat Fees and Deposit-based
Fees and updating hourly Staff rates applied to deposits. Staff also
recommends modifying the structure of some of the fees to streamline them
and be consistent with the way services are delivered; in other words, the
Flat Fees or Deposit-based Fees. For fees that are increasing, Staff
recommends phasing in any increases over two years due to the magnitude
of the changes. The first phase would be effective fiscal year (FY) 2017 and
the second phase in fiscal year 2018, bringing fees to full cost recovery.
Exceptions to the phasing are the wireless fees and any fees that may have
gone down. Upon the Finance Committee’s recommendation, Staff will
develop an Ordinance, provide notice to interested parties and notice of
schedule of public meeting for approval of the changes. In accordance with
State law, once Council has approved changes, they will go into effect no
sooner than 60 days. In this case, Staff recommends that they become
effective fiscal 2017, and that they are included in the fiscal year 2017
Municipal Fee Schedule. The consultants here with us tonight, Staff and the
consultants will be happy to address any questions. Thank you.
Chair Filseth: So we will now take comments, communications from the
public. We have one speaker, Mr. McFall.
Jim McFall: Yes. I’m Jim McFall, a practicing architect in Palo Alto. I have
lived and worked here for over 30 years. I don’t think most of you know
me. I have been out of circulation as far as the City goes for a while, but I
have been both a member of the Architectural Review Board (ARB) and the
Historic Resources Board (HRB). A few comments on the Cost of Services
Study and proposed fee increases. As you know, the Study looked at Staff
costs for various planning services then compared those to costs to the
associated fees charged for these planning services, thus showing where
shortfalls occur and suggesting where to increase fees to cover the costs of
those services, in order to maximize cost recovery. It makes sense, but I
think there is a step that has been left out of this process. It is a review of
the Cost of Services. Has any review of those Staff time expenses been
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February 2, 2016
undertaken? Was there any analysis of Staff time spent on specific planning
services? Before moving forward on increasing costs, excuse me, on
increasing fees, shouldn’t we take a look at the Staff costs to make sure
they are reasonable and appropriate? Doesn’t it make sense to consider
ways to facilitate planning services in a more efficient manner before you go
ahead and increase fees? Some of the proposed fee increases are
significant, more than double the fee for a minor ARB review, increasing the
Planning Fees for a second-story addition by 70 percent, that’s $3,000 of an
increase. This is significant money and not everyone who does a project in
Palo Alto works for Facebook or Google. The Development Center went
through an extensive process of self-examination, review of processes and
training in order to maximize efficiencies and better serve the public. I, and
from others I have talked to, think that’s been a big success. Why hasn’t
the Planning Department undertaken a similar process? When the City is
considering raising Planning Fees considerably, shouldn’t we make certain
that the costs upon which those proposed fees are based are justified and
reasonable? Thanks very much.
Chair Filseth: Thank you. With that we are open for questions and
comments from the Committee.
Council Member Holman: Can I ask a question, not a procedure question.
Are these mics hot?
Chair Filseth: I think so. They are always hot.
Council Member Holman: They are live. And then, what are we doing about
mics over here? I take it you are a consultant. Would it be reasonable to
have a consultant sitting at the table?
Chair Filseth: Unfortunately, there are only a couple of mics that are live at
the table so the gentleman will have to go to that mic or we move out.
Lalo Perez, Chief Financial Officer and Director of Administrative Services:
And then we will share the mic between the three of us.
Council Member Holman: Okay. Thank you. Maybe we can fix that.
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February 2, 2016
Council Member Schmid: Let’s see. Let me just get my bearings, asking a
couple of general questions. These are Planning Department Fees we are
talking about?
Ms. Nikzat: Correct.
Council Member Schmid: Although the activities that take place seem to
include a lot from the general Staff, legal, buildings, the Development Center
and so on, so there is a lot of bearing activities. These are Planning Fees,
and then there are separate studies going on for the Development Center.
Their fee, I assume are among these fees and would be the same. Alright, if
you could just give me a sense of what we are doing tonight.
Ms. Nikzat: Well the fees we are looking at tonight are definitely Planning
Fees and as you mentioned, there are times when there is a planning
activity that other departments need to participate in as well and review and
look at plans.
Council Member Schmid: Well, none of these activities are in the
Development Center, are they?
Ms. Nikzat: These are specifically planning activities. These are the
activities that are conducted by …
Council Member Schmid: If a resident wanted to do one of these they would
walk into the Development Center, isn’t that right?
Ms. Gitelman: The fees that we are talking about this evening are specific to
the Planning Department and planning entitlements, so they are things like
ARB reviews. You apply at the Planning Department. This does not include
building permits, encroachment permits, things that you would apply for at
the Development Center. That is going to be a separate Fee Study.
Council Member Schmid: Initial Review (IR)?
Ms. Gitelman: IR’s you apply for at the Planning Department. It is a
planning entitlement. So the way the Development Center and the Planning
Department are split, we think of the Development Center’s application
processing as ministerial permits, so there is not a lot of discretion. By the
time someone gets through everything we put them through in planning
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February 2, 2016
with the discretionary approvals that we do and they get over to the
Development Center they are in the ministerial world and the processing
happens, we are checking the Codes, checking the boxes and making sure
everything works, but these fees that we are talking about this evening are
the planning entitlements. These are all discretionary actions. You see
there is a lot of legal time involved because we consult extensively with the
City Attorney in processing these discretionary applications.
Council Member Schmid: Okay, good. That is helpful. Again, to get my
bearings, let me just ask some specific questions going through some of the
proposals. The consultant’s Report was very accurate when they said, oh,
the two things most questions are on are residents and permits, so let me
start from individuals or residents. I look at types of these things that a
resident might run into and, I guess, a resident runs in two different ways,
don’t they? Either as a developer who is looking for change or as someone
who sees change going on and says, what’s happening. Both of those would
come to the Planning Department, or would they end up at the Development
Center?
Ms. Gitelman: Well, if a resident is an applicant, like they are applying for
an IR, that would come through the Planning Department. If a neighbor
notices something happening out there and wants to find out about it, it sort
of depends on where it is in the process. If it is still going through the IR
process, then their first stop would be with us and they would raise a red
flag and potentially file an appeal. If the IR is already done or it didn’t need
an IR, and it’s in the building permit process, then they would be going to
the Development Center.
Council Member Schmid: Okay. I’m struck, I guess, back on Page 13 by the
scale of some of the changes. You have their home improvements exception
going up by 300 percent. It sounds like a lot. On Page 15 you have
Preliminary Individual Review going up 300 percent. On Page 17 public
(inaudible) that’s going up 400 percent. Parcel map 350. Talk a little bit
about why the scale if change is so high on things that residents would.
Ms. Gitelman: Sure. Just kind of big picture, I’m relatively new to Palo Alto
and my observation when I got here was that this is an old Fee Study. A lot
of jurisdictions during the recession went through the process of updating
their fees and increasing revenues by trying to better capture the costs of
providing services. I don’t believe that Palo Alto did that during the
recession and I think the fees that are currently in place are old. They have
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Finance Committee Transcript
February 2, 2016
been addressed a little bit to account for the cost of living, but they really
haven’t been reexamined holistically in quite some time. What we did in this
Study is really to look at what it costs to deliver these services and give you
my recommendation on that basis. But as Sherry indicated, it is entirely
within your discretion to say, whoa, that proposed increase is entirely too
high. For (Home Improvement Inspection) HIE’s we should do something
less than you are recommending, and that would just mean that we would
perpetuate the current General Fund subsidy of that application type.
Council Member Schmid: (inaudible) the public up and said, gee, at the
same time have we done a check on the let’s call it the efficiency of the
Staff. Is there something we should be looking at there?
Ms. Gitelman: That is a very good point. This analysis is based on the
current processing time associated with these activities. To the extent that
processing time could go down, some of the flat fees could potentially go
down. I should point out, though, that a lot of the biggest fees we are
talking about here are hourly fees, so we charge an hourly rate, and so if we
achieve efficiencies on those projects, we just bill less hours. So that is a
new onset I think is important.
Council Member Schmid: I guess I see the difference in works go fairly
dramatic. Big projects coming into the Council and you have volumes of
consultants’ Reports and studies and details or potential details, but a lot of
the work in terms of numbers must be residents making some minor
changes or adaptations in their housing. Are some of the hourly fees more
appropriate for the big detail commercial projects as opposed to the routine
housing projects and are the residents getting bumped up 300 percent for
something that is not relevant to their needs?
Ms. Gitelman: Yes, as Jonathan said, it is set up so that the larger projects
take more time, there is more variability. We are using an hourly rate in
billing our time directly. The smaller fees where there is ability to add
(inaudible), you know, we have a lot of consistency about what it takes to
process this kind of a smaller application, that is where we are
recommending a flat fee, and again, you could set a lower flat fee if you
think it is called for. Just to clarify again, though, if someone is applying for
a tenant improvement or a residential remodel that doesn’t have to come to
the Planning Department, I mean, that is the vast majority of permitting
that happens in the City. That happens at the Development Center and is
not affected by this. This is only Planning. So we get about 70 plus IR
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Finance Committee Transcript
February 2, 2016
applications in a year, but the City processes like 3,000 building permit
applications in a year, so there is a real difference. What we do is more
complicated, it takes longer and there are also fewer fee applications.
Council Member Schmid: Oh, I see. So it is a small percentage that actually
have to go through this process. I guess my last question, if you are
reacting to something that all of a sudden you see in your backyard, appeal
for question of what is going on, people say, oh, that’s why we are paying
our property taxes. To be protected from something that is intrusive,
(inaudible) why do we have to pay a fee (inaudible).
Jonathan Lait, Assistant Director of Planning and Community Environment:
So in a scenario where a resident is seeing another home, a two-story home
being proposed, and there is some concern about that development, the way
the process is set up in the Code, that is actually not an appeal. That is a
Request for Assurance. Proposing any fee for a request for hearing, that is
still the flat fee that the occupant pays. So you just request the hearing and
you have the hearing and it goes on to the (inaudible) note to the applicant
who might be concerned about that. For another type of project, say at a
residential or commercial interphase, or a multi-family, something that went
to the Architectural Review Board, there we do have an appeal fee. It is the
same fee. I don’t believe there is any change proposed to the fee. So it is
$280 now. No change is proposed to that and it is significantly subsidized,
but we understand why we would want to subsidize that fee. We are
introducing a new fee; however, as it relates to appeals, so that the
applicant who is generating this project which is being reviewed by the City
and perhaps the concern of a neighbor, we are requesting that we have the
ability to charge the applicant for the additional time and resources that will
be spent in processing that appeal fee, so that doesn’t go to the resident,
that would go back to applicant if we have to do another 100 hours’ worth of
work, the City is not paying another dime for that. We are charging the
applicant who has the project they are processing through that has
generated the controversy.
Council Member Schmid: Okay, that is very interesting.
Ms. Nikzat: (inaudible)
Mr. Lait: That’s right, that’s (inaudible.)
Ms. Nikzat: (inaudible)
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Finance Committee Transcript
February 2, 2016
Council Member Schmid: Yeah, thank you.
Chair Filseth: Are there questions? Council Member Holman.
Council Member Holman: Thank you for doing this. Obviously it is long
overdue, so thank you very much for doing it. I have some questions too. I
think Mr. McFall raises a good question about how efficient are we. It is a
different but related topic, certainly, so I have questions that don’t really
address that but want to respect that, if that makes sense. One of the
things that it has seemed to me for some time is that Code Compliance
maybe isn’t done as early as it should be in the process or could be in the
process, so you have projects that maybe go to the ARB or go to the HRB or
whatever, but Code Compliance hasn’t been performed. This is what it
seems like. We have preliminary Code Compliance that has been
performed, but maybe not totally, so errors are found later and this is from
scattered information picked up or watching my pieces of ARB meetings and
that sort of thing, and you listen to the public meetings and such. So the
ARB isn’t responsible for making sure the project is Code Compliant and so
if, that’s at least the way I understand it and I have been told over time. It
seems to me that what I have witnessed is that you have projects that go all
the way through the ARB or maybe through the HRB to, and perhaps not so
much Planning Commission, but things aren’t necessarily Code Compliant, so
there is rework that needs to be done or reconsideration because some error
is found or something that wasn’t checked is found, so it brings up how
much time is spent that the applicant is being billed for and also it has to do
with how much efficiency there is in what we are doing. So does that make
sense?
Ms. Gitelman: Yeah, I think I understand your comments. I am not sure
that I fully agree with that. I mean, I think you have a professional Staff
that is a little overwhelmed because we are understaffed at the moment.
We do our best to review for Code Compliance early in the process. We
have a 30-day period when we receive an application in which we are
reviewing for completeness to make sure we have all the materials we need
with which to do an evaluation, and then as the project is prepared for
hearing at the ARB or whatever the other process is we are doing a review
for Code Compliance. Clearly there are many sections of our Code as the
Council knows, that involve interpretation. Sometimes we interpret it one
way and then it gets appealed and it gets to the Council or wherever and
then it’s reversed. These aren’t all black and white decisions, but we do our
best to do a professional and adequate review and the projects, in large part
the projects that we act on, you never hear about. I talked about 70 plus
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Finance Committee Transcript
February 2, 2016
IR’s in a year, out of that two of them got appealed last year. So the vast
majority of what we do is review projects, complete the processing of them,
and they just move on without further comment.
Council Member Holman: And please don’t hear my comments as being
criticisms, because there is a lot of work that goes through and it just seems
like sometimes not all of the preliminary work is done beforehand, and this
is from tuning in here and there. It’s not like a constant stream of watching
and making notes. It’s checking in here and there on various meetings.
Mr. Lait: I just want to comment on that. We have this process in place. It
is kind of a little bit informal, the preliminary review for the Architectural
Review Board, and that’s not an application that we charge money for
because we want to encourage people to go through that process or if we do
it’s a modest fee. We are not spending a lot of time doing a Code
Compliance Check, so there could be some of that where you get some
feedback (crosstalk).
Council Member Holman: Okay, I’m clear. Did the consultant, and I don’t
know your name sir, Dan, did you take a look at any of the projects to say,
okay, here’s a project that was – and I don’t know how you would know
really, Staff could inform you but on your own you wouldn’t know –- we’ve
had some fairly large projects on Page Mill Road, some on Park Boulevard
for instance, one on El Camino Real. Did you have an opportunity to take a
look at any of those and see comparatively, just looking at the project as
informed as you could be about them, just look at the scope and scale, were
they comparatively in line with each other in terms of what was billed, or
can some get more complex.
Dan Edds, Consultant, Capital Accounting Partners, LLC: Again, my name is
Dan. You can call me Dan if you want to. Last name is E-D-D-S. I go by
Dan otherwise. Let me make sure I understand your question. You are
thinking you have two projects.
Council Member Holman: With relative similarity in terms of what the billing
is based on, at least appearance of upscale project.
Mr. Edds: So we have two projects relatively the same. It depends on what
kind of project you are talking about, but I think more in terms of fees, so if
you are doing an ARB you are doing a Lot Line Adjustment, something like
that, so what we did was add some – the director pointed out where the fees
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Finance Committee Transcript
February 2, 2016
are – we can establish a consistency that on the average the fee takes 20
hours. Those get a flat fee. If there is wide variation, between two hours
and 200 hours, then those kinds of projects are going to be charged out on a
deposit basis, time and materials, so in that case I think that is really what
you are referring to in those larger, more complex projects, I do not look at
individual projects because there is no need to because it is a Deposit-based
Fee, someone makes a deposit and then the revenue stream is going to be
dependent upon who charges to that particular project. So the fee really is
just the hourly rate on those.
Council Member Holman: Okay, thank you. Council Member Schmid
mentioned that there are legal fees and all kinds of other fees that could be
applied into this. Transportation and, help me if I have slipped a note here –
but Transportation is a Department, but is it not still under planning? Okay,
but I didn’t see any rate changes for the Transportation Fees.
Ms. Gitelman: Yeah, that is a separate part of the Fee Schedule and in a
separate part of the Municipal Code even, I think.
Ms. Nikzat: We did not address Transportation Fees because most of those
things are either things like parking and the costs of parking that are usually
set by Council, or there are some fees like the wide load permit, that are set
by State agency. We really don’t have a lot of Transportation Fees that we
deal with on an hourly basis, except that we do peer review of
(Environmental Impact Report)EIR’s and traffic analysis (crosstalk).
Council Member Holman: Oh, those are printed into these fees.
Ms. Nikzat: And any number of things like that.
Ms. Gitelman: To the extent that our Transportation Staff works on these
planning entitlements, those hourly rates, and those would be captured
here, so we would bill our traffic engineer’s time against the environmental
review project based on the Fee Schedule.
Council Member Holman: Okay. All I noticed here was just Planning Fees.
Ms. Gitelman: But if you look at the hourly rates in the back, you will see
there is a project engineer listed and we will capture the time of anyone who
works on these deposit projects. So we collect a big deposit, Cara works on
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it an hour, I work on it an hour, the traffic engineer works on it an hour. We
are charging all that time to the project.
Council Member Holman: Is the same thing true with Public Works, because
you have trees and …
Ms. Gitelman: Anyone who is working on that project we will collect from
them.
Council Member Holman: I think it would be helpful – I don’t know about
other Council Members, I’ll see what they have to say – but it seem like it
would be helpful to indicate that in here somewhere so that we know that
we are being comprehensive in our approach. Another question is that early
in this Staff Report it talks about Cost Recovery Percentage Rates, low,
medium and high, and on a number of occasions it talks about 100 percent
cost recovery, but in other occasions it wasn’t clear to me what percentage
we were charging. It just didn’t say 100 percent, it just named a fee, so are
those low or medium, or high but not 100 percent Cost Recovery? I can pick
out any one here. Legal review of (inaudible) with the City Council.
(Inaudible) I just opened it up here. Expansion of existing two-story greater
than 100 square feet that is part of (inaudible) review that it says a fee and
then a proposed fee for 2018. I don’t know if that’s low, medium, high.
Ms. Gitelman: What we meant to communicate is that in the last column, so
the last fee there in the right-hand column is what we think full cost
recovery will be, and so what we are charging now is well below full cost
recovery, and we are proposing to get to get to full cost recovery over two
steps, just because it is such a big increase in some cases.
Ms. Nikzat: I believe at the bottom of each Page there is a little plus sign
that indicates if we did not reflect the full cost and in those cases I believe
we missed one which was an appeal, but other than that I believe we also
have daycare. (Crosstalk.)
Council Member Holman: Right, that one was filled out.
Ms. Nikzat: That was is 50 percent. I don’t see any others. I believe so.
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Council Member Holman: Yes, that one was filled out. So what you’re saying
is everything in this Fee Schedule is full cost recovery except for filing for an
appeal and daycare. Is that what you are saying?
Ms. Nikzat: The rest of them, if it was a Deposit-based Fee, we would put in
a minimal amount for a deposit, and if it was a flat fee it would be the full
Cost Recovery Rate.
Council Member Holman: Okay. So if that is the case, I went through every
one of these, believe it or not, I went through every one of these and I saw,
(inaudible) it was kind of like really. I’m not going to be able to find it
quickly here, wherever it is, here it is. You know I wouldn’t be happy about
this, demolition application for restored buildings. It has been $2,472 and it
is going down to $1,001. Does that mean we have been overcharging all
this time, and how in the world could it be that low, because I can’t imagine
it can be that low because you would have to analyze whether the building
was historic or not, if it’s on the inventory, if it’s retained its character. You
would have to gather the HRB. I just can’t imagine why it would be so low.
That is one that went down.
Mr. Lait: Right, and the reason that went beyond is what we are capturing
here is the Staff time in evaluating the request for that request and in some
of those instances, we are likely going to require a Resources Inventory
Report, which is a professional consultant’s Report, and so we have captured
that under a new section here, environmental documents or research
projects that are required, where we charge now an hourly rate to review
that (Historic Resource Evaluation)HRE and to provide comments. We have
a flat fee if it’s one that we can look at. We do our in-house analysis, we
take it to the Board and we think it is pretty straightforward. That is the fee
that is charged here. If it requires more review, a consultant’s Report, we
are going to charge for the cost of that consultant’s Report plus 25 percent
to account for Staff time in managing that contract.
Council Member Holman: Thank you for that and since you mentioned it. I
am gratified and a bit shocked that we haven’t been charging 25 percent
over. I can’t imagine any business that hasn’t done that in the last umpteen
years, so thank you for adding that now. The other thing was a lot of fees
talk about deleted and moved someplace else, but there is no way to know
where else it was moved to, so it is very hard to track what went where.
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Ms. Nikzat: I am very sorry about that, Council Member Holman. One of the
things we were really trying to do was see that in the legal fees. I think that
is particularly where you see it. In the past legal fees were separated. That
is a separate piece and this gets to your question about when other people
are involved besides Planning Staff, so we are looking at this as an activity
and who is involved in the activity. It seemed to make more sense to
simplify the fees by putting the legal activities when they weren’t extensive
to actually fold them into the fee where we could quantify how much legal
time would be involved pretty easily, we could fold that into the flat fee,
which makes it easier for the person who is taking in the application, and
makes it easier for the applicant to understand the true cost.
Council Member Holman: I think some of that explanation, and again we will
see what other people have to say, but I think some of that explanation
when it goes to the full Council, would be really helpful, so we don’t get the
same questions all over again. I think there are two more questions before I
pass it off. So currently, and this was really like, wow, so current Operating
Budget we are subsidizing 80 percent of Planning Department activities,
understanding that certainly now we are doing the Comp. Plan
(Comprehensive Plan) update and blah, blah, blah, but even after these
increases, we are still subsidizing 69 percent and that is just stunning, and I
think it would be helpful again, when this goes forward – there is a brief
description in here to kind of what kinds of activities we do subsidize and
many of them are reasonable and rational and logical, but the number is so
large, the percentage is so large that I think it is a little bit hard to swallow,
so if more meat could be put around that it would be helpful. I had one
other question which had to do with Code Compliance, I believe. I’m glad
also – I noticed, of course, that these are fully loaded costs, so thank you
very much for that. I’m missing my question right now, it’s okay if you can
pass it on and maybe come back. Thank you for your time.
Chair Filseth: Very well. Council Member Wolbach.
Council Member Wolbach: So first actually I would just want to say,
speaking only for myself, I did not share some of the concerns about the
clarity with the stuff about what was deleted and was somewhere else. More
clarity there would probably be for full Council. The question of where the
money is going, the General Fund and Fee Funding combining to subsidize or
pay for the Planning Department, it didn’t bother me. We subsidize, you
could say, most of our department. It is what we do. I was really interested
in the first paragraph on Page eight of the Staff Report, which was Page ten
of the Packet and Council Member Holman was trying to get to this a little
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bit, talking about daycares leads to the question are there things that we
want to encourage or in some way support as a matter of equity or a matter
of encouragement that we want to provide some subsidy to those kinds of
activities when they are brought by members of the public, be they a big
developer with the project or a homeowner making a change to their house.
That is an interesting question. I am just going to share a couple of framing
thoughts about this question, and also my question about how the process
works. Before I get into this, what do we need to decide tonight regarding
this? I mean, if there are any (inaudible) or changes or suggestions, would
you need us to highlight each particular line or if we wanted to get into some
kind of general guidance on something that we want to, say, encourage or
provide some kind of subsidy for, Staff could maybe go back and figure out
the details of where that all falls, and then bring that back. Is that how this
would work tonight? I want to make sure that I am just following a smart
process that is respectful to Colleagues and Staff.
Ms. Gitelman: I guess we would be open to the Council Members input on
this. We have to know this is a public hearing and the City Council will have
an Ordinance, so our thought was any input you could give us tonight would
help us draft Ordinance and prepare it for Council. If there are specific –
you know, you can be as specific as you want to be – if there are specific
things you want us to bring back before we go through that next step, we
can do that too. Our goal though to get an Ordinance adopted by the
Council in enough time that it can take effect at the first of the fiscal year.
Council Member Wolbach: The first fiscal year date would be July 1, 2016.
Ms. Gitelman: And it takes 60 days to take effect.
Council Member Wolbach: And so what we might do, I’m just thinking if
there are – I’m just brainstorming about this in a minute – but if there are
things that we want to provide some kind of either incentive or, for equity
sake, some kind of subsidy, we might want to have that take place the
following fiscal year rather than the coming fiscal year, because we are
looking at years ’17 and ’18 that you are proposing here, correct?
Ms. Gitelman: Correct. I should say too, we do have, separate from our Fee
Schedule that we instituted within the last couple of years a Fee Waiver
Policy that lets the City Manager waive fees for nonprofits in certain
circumstances. I don’t remember exactly what the policy says, but that’s
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the situation where if, for example we had a Nonprofit Affordable Housing
Development that was proposing to develop affordable housing.
Council Member Wolbach: How do you know where it’s going with this?
Ms. Gitelman: But we do have the ability to offer incentives in terms of
waived fees in cases like that, and that is not a dissection of the Fee
Schedule, but it is in the City’s Fee Schedule.
Council Member Schmid: Could I just add a comment to what Cory had
brought up, daycare center was mentioned specifically and he only
mentioned the day care and the fee is a 900 percent increase in fee for Use
Permit. That stands out.
Council Member Wolbach: What Page is that of the Packet?
Council Member Schmid: Packet Page 19, first line.
Council Member Wolbach: We had circled that. So I will just bring out a
couple of thoughts for my Colleagues. Oh, is there something else you
wanted to add.
Ms. Nikzat: I just wanted to say I believe the reason daycare center was
called out was because this institutional memory is that daycare had been
subsidized in the past and that the amount that is in there you may note,
that is one of them that is not at full cost recovery. That is actually at 50
percent of the full cost recovery.
Council Member Wolbach: Okay, just a couple of framing thoughts for how
we think about whether we want to push anything here or do it in the Fee
Waiver Policy separately, first, obviously we are the Finance Committee, so
of course, we want to be financially prudent, especially considering
overburden of Staff and an overburden on this department in particular, so
that is the first rule element to keep in mind for me. Another is fairness.
The developers should be paying their fair share, but at the same time,
residents, I don’t want to see us milking residents because they are doing
something on their own property that is within our Code, that is within what
we allow, but then there is also the policy considerations of what I was
saying before, of discouraging or encouraging something. You know, to a
degree not quite punitive, but say we are going to do full cost recovery on
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this, but cutting down for something else, whether it is daycare, senior
center or a school, be it more housing or if it is multi-family housing that
includes a substantial chunk or is completely below market rate. I know
that, obviously, paying our Transportation Commission (Planning and
Transportation Commission) to start conversations about accessory dwelling
units which are called out in our Housing Element and to have our own
Comp. Plan is somebody wanted to add or start a secondary dwelling unit
and list it as a Below Market Rate (BMR) unit, which is one of the questions
the Planning Commission brought up recently, would we want to reduce the
fees for that or is that something we want to tackle later for future year
discussion, Fee Waiver Policy. A lot of these questions I’m kind of putting
out expecting that we are not going to act on them now, but I wanted to at
least float the concepts and the consideration for us to think about on the
Committee and also for Staff. My guess is that office developments we are
probably not enthusiastic about, I’m just guessing we are not going to be
enthusiastic about. Subsidizing the fees for something that is residential,
especially with residential with Below Market Rate units or residential with a
little bit of retail, we might be interested in exploring that at some point.
Again, we don’t necessarily need to act on those tonight, but I just put those
out there, I guess, as policy consideration for everyone to think about and I
leave it open for thoughts on how we best proceed or whether we come back
to that either at a later date or in a later year.
Chair Filseth: Okay, is there more?
Council Member Wolbach: That’s it. Why don’t I actually say one more thing
about that which is, obviously, the Planning Commission is dealing with
(inaudible), we are working on our Comprehensive Plan and so I guess part
of the question is, how does our consideration of these fees as they relate
and the policy implications of these fees relate to those other discussions
about Ordinances and (inaudible) and maybe it is better to wait and see
what comes out of the Comp. Plan of the Planning Commission, etcetera,
and then use that to inform future discussions about fees. If the Comp. Plan
says we really, really want to push X, we really want to (inaudible) that
maybe the next time we have this discussion, we say okay we settled on our
Comp. Plan and the Comp. Plan says we want to push this, let’s subsidize
this a little bit more, and I do appreciate the call out in the Report that Staff
would like to see us do this on a more regular basis. I think that is so that
we can have a more agile system.
Chair Filseth: Thank you.
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Cara Silver, Senior Assistant City Attorney: For the Chair, if I could just, on
one issue there, this issue of the relationship between Comp. Plan and fee
levels comes up a lot in connection with development in housing and in the
Housing Element, and so there is actually an exercise that we go through
with our Housing Element is to look at whether the fees that we charge for
housing processing is actually serving as a constraint to the development of
housing, so that is a very logical nexus and it is built into our process, and
so if it is found that the fees are too high and serving as a constraint we will
typically see Housing Element policies that say, look at the fees.
Council Member Wolbach: Can I ask a follow-up question to that? Does this
reflect consideration of the Housing Element discussion about that issue?
Was that taken into consideration when putting this together?
Ms. Silver: I don’t believe that the current fee levels, which are obviously
very subsidized, served as a constraint in this Housing Element cycle, so it
was not identified as a constraint. If we increase the fees, then we would go
through that analysis again in the Housing Element and there might be a
different finding.
Council Member Wolbach: I guess what I would say at this point then is, if it
needs to be included when we do Motion tonight, that if the Proposed Fee
Schedule for 2017 and 2018 are likely to serve as a constraint on housing,
then we would want to subsidize those fees.
Chair Filseth: I have a few questions. First, let me ask a question. If I
understand the process here, the protocol we are talking about is that there
would be a major review of fee structure each three to five years, but then
an annual adjustment where we estimate the change in wage and benefits to
adjust the fees. Is that correct?
Ms. Nikzat: Yes.
Chair Filseth: Next question, if I read this correctly, essentially what we are
saying is the current level of recovery is below 100 percent and if we
increased the recovery, most of these to 100 percent, right, in this
document, the gap is about $900,000. Is that right? And we would be
doing that over two years. So if we did it all in the first year, the difference
between doing it all in the first year versus doing it in two years costs the
City about $450,000. Is that essentially right? Do you have an estimate for
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how much of the $900,000 is commercial versus residential fees? Have you
looked at that?
Ms. Gitelman: I don’t think we do. We would have to look at, I don’t even
really know how we would do that. I guess we would have to go back and
look at a sample year and see how many A or B applications we got that
were mixed use versus commercial, wholly commercial, and how many IR’s
we did. I mean it would be.
Chair Filseth: Dan, have you got any impression of that?
Mr. Edds: I think Hillary’s point is very accurate. Basically you would have
to go back through all the documentation on every project, say okay, was
this commercial, was it residential, was it multi-family. We could probably
back into it. It would be an estimate. I’m thinking, Jonathan, correct me if
I’m wrong, we could go through the list of fees and say, well this one is
predominantly commercial, this one is predominantly residential, but that
would probably be a pretty rough estimate, but it would be something.
Chair Filseth: I understand. We show the stuff that goes to the ARB a few
times tends to be commercial, right, as opposed to, not everything.
Mr. Edds: And that’s what we would be looking at, does this one tend to be
commercial or does it tend to be residential. I guess the inclination is to say,
if it’s mostly commercial, then you feel one way about the time frame of
phasing it in, because it is a business expense and the numbers or amount
of money involved in these things is pretty much larger in all these fees,
right, as opposed to residential you might look at it slightly differently.
Ms. Gitelman: One thing I should say is that we are proposing this big
increase in hourly rates and one thing that it would be possible to do is go
right to the top on the hourly rates, the fees in the flat fees.
Chair Filseth: What exactly does that mean?
Ms. Gitelman: It just means that the bigger projects that we charge hourly
would be paying 100 percent right away, whereas the smaller projects, the
flat fees you would phase them in over two years. That is a possible
compromise.
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Mr. Edds: From my perspective, that, I think, would be a very accurate way
of getting to your point, because those Deposit-based Fees, Jonathan,
correct me if I’m wrong, Deposit-based Fees more than likely are going to be
commercial.
Chair Filseth: Right. And what you would save would be, the (inaudible) that
would say raise the hourly fees in year one, and the flat fee phase in over
two years. Is that essentially what we are saying?
Mr. Lait: The deposits.
Chair Filseth: Of course, you would like that to be in that plus to the City
versus just doing a 50/50, as written, but presumably it would be because
you would be dealing with big projects.
Mr. Perez: You could make it 75/25.
Chair Filseth: Actually, you could take the flat fees and do them over, that’s
what we said, take the flat fees and do them over two years and the hourly
fees do them over one year, so that would be ahead.
Ms. Nizkat: And I assume increase the corresponding deposits and the
deposits would go up too.
Ms. Gitelman: Yes.
Chair Filseth: So that seems like something we should consider.
Council Member Schmid: Could I ask the following?
Chair Filseth: Yes, please.
Council Member Schmid: We have an aging population and we have an
aging housing stock. Will this dramatic increase in fees do anything to
discourage the updating of that housing stock?
Ms. Gitelman: We charge fees for IR’s, so if someone replaces an existing
home or a two-story home and we charge Planning Fees for architectural
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review, but just remodel of existing homes or tearing down and replacing an
existing home? I don’t think that is implicated here, is it?
Mr. Lait: No. The IR fees, the Individual Review Fees are going up, as you
can see and it is a big increase and when you look at the overall expense of
demolishing a home and building a new home, it’s modest, I think,
compared to the cost of building a new house.
Council Member Schmid: I guess it is a little upsetting that you can’t answer
that question of what share of your current fees or the new fees would be
residential as opposed to commercial. I guess I would assume that the
high-end share would be commercial.
Mr. Lait: I think that is accurate, but as you know, we get a lot of A or B
applications that are mixed use, some that are purely commercial. We
would have to go in and dissect every application to determine what share is
residential versus commercial.
Council Member Schmid: I would just guess though that in this city City in
the last few years, mixed use, it varies from city to city, but in Palo Alto
mixed-use has been dominated by commercial space, right? I would
assume.
Ms. Gitelman: Yes. And I think it changes over time, but you’re right, in the
last several years probably we have seen mostly the commercial. When you
look at those big fees, they are commercial.
Chair Filseth: That was actually my next question. What triggers the
Individual Review? Does a kitchen remodel trigger an Individual Review or a
two story?
Mr. Lait: Adding a second story adding to a second story, more than 150
square feet.
Chair Filseth: So if I add another bedroom on the ground floor of my house
is fine, so adding a second story, or a tear-down, and we have 70 of those a
year or something like that.
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Mr. Lait: So if you do the number on that, as I did, based on $2,500, goes to
$2,800 as the fee, it is $150,000 roughly of that $900,000, so it is on the
lower side of that.
Council Member Wolbach: I’m sorry, which Page was the IR on? I just want
to follow, I just want to get what Page we are on.
Mr. Lait: The IR is, I don’t have the Packet Page number, but it’s the, it
Packet Page 15, the top of the Page.
Council Member Wolbach: Got it. Thank you very much.
Chair Filseth: My next question I wanted to ask, when I look on Packet Page
nine, they sort of compare us to other municipalities, and if you look at
Beverly Hills, California, their hourly rates charged to the public are between
$400 and $500 an hour, which is prime consulting, junior partner legal time
wage, how do they do that and not run afoul of (inaudible) 18?
Mr. Lait: If I could speak to that, Beverly Hills, I’ll give you one example of
what is included in that hourly rate that is not included in this hourly rate:
Code Enforcement. We had a conversation about how do we allocate the
cost of Code Enforcement. Should it be allocated, should not be allocated,
should all of it be allocated, should a portion of it be allocated or none of it.
Beverly Hills took the, in my experience, the somewhat unusual approach of
saying we are going to recover all of the cost of Code Enforcement, so part
of that hourly rate that you see for Beverly Hills is, in fact, a small
component piece for Code Enforcement. In this case, we did not include
anything for Code Enforcement. That is just an example. There are several
other examples of activities that go into those hourly rates for Beverly Hills.
Chair Filseth: You know what I am about to ask. Should we?
Ms. Gitelman: I’ll tell you our thought process and the Cara probably wants
to weigh in. You really have to be able to make a good case that the
activities related to this service are being provided for which the fee is being
charged. I think it is possible to say there is some little bit of Code
Enforcement that is related to, that an IR applicant benefits from, but our
assessment was that to fully subsidize the whole program with fees and
make the applicants pay for that was not appropriate. I don’t know if Cara
wants to add.
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Ms. Silver: I agree with that.
Council Member Holman: Can I just follow up to that?
Chair Filseth: Yes please.
Council Member Holman: So we tend to be rather loath though to charge
penalties, so we are not capturing those, so is there another way we can do
this, or should we be charging, is there another way we can do this? Do we
need to enhance our interest and incentive within the City to charge fines for
people who aren’t Code Compliant, or do something like this? I’m not
suggesting we do that, and the public would be thrilled if we would do
something that would actually incentivize people to bring whatever issues
into compliance.
Ms. Silver: Yes, thank you. Absolutely you can do that. What we do is we
update our Administrative Penalty Schedule once a year and that is the time
to examine that issue. Of course, if you wanted to bring it up at off cycles,
we can also take a look at it. One of the things that we have clarified, I
believe this year, with our Administrative Penalty Schedule is that the
continuing enforcement problems are going to be charged on a daily basis.
It was not the case a few years ago. It was just a single occurrence, one
single fine of $200, but if that enforcement problem continues, then we do
how under our new administrative schedule, have the ability to charge daily
fines, so that’s a good thing. I know that Staff was also looking at
enhancements to penalties in connection with the Planned Community (PC)
process, so those efforts certainly are underway.
Council Member Holman: So you are saying then, am I learning here that
the PC’s that are out there that are noncompliant are going to start getting
penalized on a daily basis if they don’t come into compliance in a number of
days, and how is that – I’m sorry, this is a little bit of a digression here, but
I venture there are a lot of people – how is it going to be assessed and
collected?
Ms. Silver: I didn’t mean to imply that we are making an active change to
our PC Penalty Process right now. The existing schedule, though, does allow
a daily penalty, so for instance with Edgewood – this is getting a little off
topic – but with the Edgewood Plaza Grocery Store, which is under an
obligation to provide a community benefit, that is being assessed now on a
daily rate basis, so there is that ability to do that. What I was referring to is
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that I think there was some further discussion about how to asses PC
penalties, such as creating an escrow account and charging for the
enforcement costs in all of that, and that was going to be studied in
connection with PC reform in general, and that process has sort of been put
on hold now with our PC Moratorium.
Council Member Holman: Non-PC Code Enforcement?
Ms. Silver: Yes, you can evaluate that when our Annual Penalty Schedule
comes up for review.
Chair Filseth: I have to note, we are starting to get off topic here.
(Crosstalk) I have a suggestion, I think we can bring it up later when we
start talking about future Agenda Items, because that is one of the things
that will be done later. So I made a note of it here. I had one more
question which is, you said earlier that the Study accounted for wages and
benefits, but not things like sick leave, vacation expense and other things
like that, and why now, or where is the sense that would be (crosstalk)
small, very small difference.
Mr. Edds: Actually, it does account for sick leave. The way I do the
calculations is at some point it comes down to what is the productive hourly
rate and then what are the productive hours. So in calculating productive
hours we start out with the standard 2080, we subtract out vacation time,
paid holiday time, sick leave, the full account of sick leave, training, routine
meetings, so all of that again gets built into the hourly rate.
Chair Filseth: But I assume one thing it doesn’t cover is that we don’t
recovery the costs for is the growth in the unfunded public pension and that
liability which we have now which is $500 million, growing at 15 to 20
percent a year?
Mr. Perez: The calculation we use, what we input in terms of the projected
rate that we get from (inaudible) for the employer’s side, so it would only
cover that portion of it.
Chair Filseth: Right, which is the funded portion, no the unfunded portion.
Mr. Perez: Yes. It assumes that they eventually will deal with the unfunded
over a period of time, but just so you know, there are many variables.
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Chair Filseth: Maybe for the future Agenda Items, we could talk about that.
So just in general I will make a comment here. We sort of had a discussion
of subsidizing things and the cost of these kinds of services that there are a
couple of components. One is the amount of time it takes and what that
time costs us, and the other is there has been some discussion, and Mr.
McFall brought up, what about the efficiency of our processes in doing this.
I think it is not possible for us on the Finance Committee to dig into the
efficiencies of our processes for doing things. I think we have to look at
what our costs are, and that’s what they are. With regard subsidies and
exemptions and so forth, the costs are what they are and so if the applicant
doesn’t pay for them, then somebody else has to pay for them, and that is
going to end up, because it comes from the General Fund, being basically
the residents of the City who pay 72 or 73 percent to be refined in the
Comp. Plan finance discussion of the costs of running the City. I think we
should, in general, keep this process as simple as possible, shoot for 100
percent cost recovery on almost everything, rather than trying to build a
patchwork smorgasbord of exemptions. We have a couple here that are
worthy things, daycare centers and so forth. I think affordable housing
potentially is one of them, right, although we don’t build a lot of Affordable
Housing Projects per year in the City, and so if there are things that are very
few, we are not doing lots and lots of them, maybe the fee waiver process is
just much more efficient to do it, so I think we should consider that. That
would be my hope is that we will do maintain the simplicity. I do like the
idea of accelerating faster than two years going to 100 percent cost recovery
for big commercial projects, the cost of doing business. Again, somebody
has to pay for it, right, and if the applicant doesn’t pay for it, then people
paying their mortgage have to pay for it. Motions?
Council Member Holman: It sounded like you were just making one.
Chair Filseth: If somebody else wants to make one, or maybe I will make
one.
MOTION: Chair Filseth moved, seconded by Council Member Holman to
recommend the City Council adopt the schedule for Planning Fee Increases
and Adjustments and hourly rates to better reflect the City’s User Fee Cost
Recovery Level Policy with the addition that the hourly fees will go to 100
percent cost recovery in year one and flat fees will go to 100 percent cost
recovery on a two-year schedule.
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Council Member Holman: That was on my list to actually ask, that was one
of the questions I didn’t ask earlier, the tiering. I do support that I have a
question about it and that is, there aren’t that many flat fees really. Do we
have any notion, can anybody do a quick look back in the envelope like how
much difference it is, one of you two accounting guys.
Chair Filseth: I saw it in here somewhere, there is a list of the number of flat
fees versus.
Mr. Lait: Do you want the dollar amount?
Council Member Holman: I want the dollar amount if that is reasonable to
try to ascertain. Because as Eric said, (inaudible) somebody has to pay for
it.
Chair Filseth: It is appearing like 2016, for fiscal 2017 may be a lean year
for the City.
Council Member Holman: I do support the Motion. Again, there are some
things that I asked for earlier that it would be great to have at the time this
goes to Council. That would be one of those items, if you agree to that. It
doesn’t need to be in the Motion, but if you can agree that is a (inaudible)
that should be presented to the Council.
Chair Filseth: Can you state again exactly what you are requesting?
Council Member Holman: The Fee-based Projects tiered to mean how much
we are capturing in the first year versus what we would be capturing if we
did it all at once.
Chair Filseth: Is that acceptable to Staff?
Ms. Gitelman: So we would analyze the revenue that would come from the
flat fees in year two. Okay, and compare that to what we would be getting
in year one.
Chair Filseth: I would be interested in that. I think that would be a useful
number. I don’t want to burden the Staff with too much work.
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Council Member Holman: I support that and I have another comment but I
think we should deal with the Motion first.
Council Member Schmid: I would like to add an Amendment. The
understanding from our discussion tonight was clearly that the dramatic
increase in fees would not have a huge impact on residential, so I think that
should be stated clearly in the Report going to Council that either show the
estimated share of new fees that would be paid by residents, or have a clear
statement that the maintenance and upgrading of existing housing units will
not be affected.
AMENDMENT: Council Member Schmid moved, seconded by Council
Member Wolbach to include in the Staff Report to Council that the increase
in fees will not have a dramatic negative impact on the maintenance of
existing housing stock.
Chair Filseth: So with respect to calculating the actual impact, I think what I
heard was that would require a great deal of work to go back and track
down all these numbers. Do I understand that right?
Ms. Gitelman: Yes, although if Council Member Schmid is looking for
something like in the whereases of the Ordinance, I think we can include a
statement as you just implicated, which is the maintenance of existing
residences (crosstalk) would not be affected by these fee changes.
Council Member Schmid: I think that is the assumption we are making in
approving this and just to have it clearly stated it would help all the Council.
Council Member Holman: So what you are saying is that maintenance of
existing residential, because it’s not going to be affected by this anyway.
Council Member Schmid: It’s the rebuilding, it’s the updating of the existing
residential housing stock.
Council Member Holman: I wouldn’t support that, because I don’t think,
housing stock is a large topic. I think Chair Filseth said it well, City Manager
can use the Waiver Fee for Affordable Housing Projects, which I am certainly
very supportive of.
Council Member Schmid: I’m not asking for any Waiver Fee. (Crosstalk.)
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Chair Filseth: You’re talking about existing single-family homes that want to
remodel their bathroom or something.
Council Member Schmid: Or the need of rebuilding of the center structure or
the outer walls. I mean, we have an aging housing stock that needs
maintenance and they need to get approval of permitting.
Chair Filseth: But if I understand what I heard here, most of those will not
trigger an IR.
Council Member Schmid: And that’s why I would like to have a clear
statement.
Council Member Holman: IR regulations are clearly stated already in the
Code. IR is demolition and construction of a new two-story home.
Council Member Schmid: I’m just a simple Council Member and I had lots of
questions after reading this, and so it would be helpful to ask the full Council
to have that statement clearly put.
Council Member Holman: I am sorry, but I think the scope of the question,
the topic is so broad that I am not quite sure what it would cover and what it
wouldn’t cover. What your intention is.
Council Member Schmid: Well, we had a statement that about 15 percent of
the current activity of the department would be on the residential request as
opposed to commercial.
Council Member Wolbach: Is that single family or multi-family.
Mr. Lait: IR is just a single family. Just doing the back of the Page, for
somebody who is not even mathematically inclined, just running the
numbers, $2,500 times 70 applications, that is about $150,000 and we are
talking about a $900,000 increase over time, so each individual applicant
who is coming in to, if they want to tear down their home and want to build
a new home, the net increase that is going to be affected by these fees at
most would be the difference between the $2,800 that we charge now up to
the $5,600 that we will be charging in 2018, so yes, it is about a doubling
almost of the fee. I don’t want to minimize that. It is a lot of
money.(Crosstalk.)
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Chair Filseth: The majority of people aren’t tearing down a home and putting
up (crosstalk.)
Mr. Lait: We may have some people here who can speak to the overall costs
of building a home, so it would certainly be a lot for me, but I think
(crosstalk.)
Council Member Holman: So here is why I wouldn’t support it. I don’t want
to subsidize and I don’t want to ask other people to subsidize not that large
an amount of money compared to the cost of a new house. If somebody is
going to build a new house they can absolutely afford that very small
increment of money. I don’t want to ask my neighbors to subsidize
somebody down the block rebuilding a house and the consultant is nodding
his head in agreement.
Mr. Lait: As I am understanding the comment, it’s not that anything about
this would be subsidizing redevelopment of a home, just that if you choose
to redevelop your home, you’re not going to be negatively impacted by the
fees that are being proposed to be introduced here. No subsidies, just
(crosstalk.)
Council Member Holman: No, except if we are not collecting it, somebody is
paying it. (Crosstalk.)
Mr. Lait: Well the occupant is paying for it, but it is a modest increase
(crosstalk.)
Council Member Schmid: It’s a small share of what we are approving.
Council Member Holman: I won’t second. Sorry.
Council Member Wolbach: (inaudible)
Council Member Schmid: (inaudible)
Council Member Wolbach: Do you want it restated to make sure I was really
clear about it?
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Council Member Schmid: Just that the Report to Council clearly states that
the share of the fee increase will not have negative impact on the
maintenance of our existing housing stock.
Council Member Wolbach: Will not have or is not expected to have?
Council Member Schmid: Well, will not have a dramatic negative impact on
the maintenance of our existing housing stock.
Council Member Wolbach: But is it explanatory or is that pulsing direction, I
guess is the question the Chair was trying to get to. Are we just trying to
verify the Report or are we establishing (crosstalk.)
Council Member Schmid: Well from my perspective, it is the assumption I
am making in voting in favor of this.
Council Member Wolbach: And does that include single family and multi-
family, or just single family?
Council Member Schmid: Well both, if you want to focus on single family that
would be fine. It is dealing with an aging housing stock that when you need
to put in new supports, new walls, new roof, whatever it is, that this vote
will not have a negative impact.
Council Member Wolbach: This is going to come to Council, right?
Council Member Schmid: Yeah, this is just to help Council (crosstalk.)
Ms. Gitelman: It’s going to be a public hearing.
Ms. Nikzat: Yes, just as fees.
Chair Filseth: I’m not going to second.
Council Member Wolbach: I will.
Chair Filseth: Care to speak?
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Council Member Schmid: Well, I think when we talk about housing in Palo
Alto, we are talking about an aging housing stock where the average age
has gone up dramatically over the last few decades, and that means a lot of
rebuilding parts, central structural parts of the house or houses themselves
and these fee increases we are voting on are quite dramatic and I think the
understanding in our discussion was that the fees would primarily hit large
new, commercial developments as opposed to maintenance of the existing
housing stock, and just to put that assumption clearly in the Report to
Council would be helpful.
Chair Filseth: Care to speak to your second?
Council Member Schmid: I think he said it well.
Chair Filseth: I think I will not vote in favor of the Amendment. I think,
given what we are talking about, I think an appropriate mechanism would be
for you to bring it up at the Council meeting and the Staff to respond to
Council, and I think, therefore, it is not necessary in the Motion itself and I
would prefer simple Motions. Any comment? Vote on the Amendment.
AMENDMENT FAILED: 2-2 Holman, Filseth no
Chair Filseth: Any further discussion on the mainMotion?
Council Member Wolbach: Yes. I have a question. Going back to some of
the things I was discussing earlier, I want to get just a little bit more clarity
about this Fee Waiver Policy. My central question about the Fee Waiver
Policy, is this something where there are standing – I’m thinking about
whether I want to offer an Amendment tonight or when it comes to Council
or reserve my thoughts for the Fee Waiver Policy – is that something that is
always case-by-case and up to the City Manager’s discretion, or is it
something where Council has set standing orders so that we are telling the
City Manager you should always grant a fee waiver for X?
Ms. Gitelman: I’d be happy to read the Fee Waiver Policy to you. It was
enacted as part of last year’s Budget, I think. It says that the
recommendation of the Planning and Community Environment Director or
the City Manager may waive all or a portion of a Planning Fee when the
applicant is a nonprofit organization or another governmental entity, and the
following findings can be made: one, the proposed project would advance a
public purpose benefitting the residents of Palo Alto; and two, General Fund
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February 2, 2016
support is available to backfill the fees waived. City Manager will report
annually to the City Council about fee waivers granted pursuant to this
provision as part of the closing of the Budget.
Council Member Wolbach: So that sounds like it is pretty limited in scope. I
don’t think that is broad enough to address my core concern, which goes to
this issue of whether our fees provide a disincentive to the housing stock,
whether it is repair of existing stock, preservation of existing stock. This
concern that we may lose stock at times, or the construction of new housing
stock in accordance with our comprehensive plan or Housing Element and
our City regulations, I guess I would actually offer an Amendment, which I
don’t want to jinx it, but I think will probably be unsuccessful as the last one
was. Again, my purpose is to at least put it out there for discussion.
Perhaps it will come up again in front of the full Council or will find another
way or another time to address it. I would like to offer a friendly
Amendment that we direct Staff to study whether any fees provide a
substantial disincentive to housing preservation or construction in our
Housing Element of our comprehensive plan and if so, to subsidize such fees
as relevant.
AMENDMENT: Council Member Wolbach moved, seconded by Council
Member xx to direct Staff to study any fees that may provide a substantial
disincentive to housing preservation or construction as warned of in the
Housing Element, and to provide Council with options for subsidies to
prevent such disincentives.
Chair Filseth: All housing, since we are talking about here is housing and
commercial and that’s it.
Council Member Wolbach: Right, that’s for housing. I can’t remember which
section it is, but yes (inaudible) but before I speak to it I will see if there is a
second.
Council Member Schmid: Could you restate it?
Council Member Wolbach: Yes, let me make sure I got it right, or did the
City Clerk type it?
Ms. Gitelman: I have some, direct Staff to study fees, provide a substantial
disincentive to housing preservation or construction in the Housing Element,
and if so, to subsidize it as relevant.
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Council Member Wolbach: As warned of in the Housing Element, and to
recommend to Council or to provide for Council an optional subsidy to
prevent such disincentive. Basically it would (crosstalk.)
Council Member Schmid: Does that differ from the existing Housing
Element?
Chair Filseth: You are proposing to waive all fees on housing projects.
Council Member Wolbach: Only if it identified as being substantial, so this is
something we will leave to Staff to figure out, only if it provides a substantial
disincentive. If it is modest, as values are modest and insignificant
compared to the total cost of housing, in those cases there would be no
waiver. This is something that our Housing Element warns of is that there
may be things in our policy which provide a disincentive to producing the
housing that we have to, and this Motion would stay Staff should look at if
these fees have that kind of effect and if they do when this comes to
Council, say here’s how you could subsidize these fees in order to prevent
that disincentive.
AMENDMENT RESTATED: Council Member Wolbach moved, seconded by
Council Member xx to direct Staff to study any fees that may provide a
substantial disincentive to housing preservation or construction as warned of
in the Housing Element, and to provide Council with options for subsidies to
prevent such disincentives. (Amendment Stated Above)
Council Member Schmid: I guess my feeling is the Housing Element will be
coming to the Council in a couple of weeks and there is a language in the
Housing Element directed to this, is that correct?
Ms. Gitelman: That Housing Element contains an analysis of this issue and
the existing Fee Schedule as it relates to this issue, and I haven’t read that
section in a long time, but I believe it concludes that the cost of land in Palo
Alto is far and away the greatest constraint on new housing and the
availability of land, so the fees that we charge pale by comparison to these
other constraints that we really have nothing to do with.
Council Member Wolbach: So essentially you think that it is not necessary to
do an analysis because we have already done it and concluded that this is
insignificant.
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Ms. Gitelman: I think so, but this Fee Waiver Policy kind of grew out of that
Housing Element, because in the Housing Element we talked about the need
to potentially waive fees for 100 percent affordable projects, and so we
proposed this Fee Waiver Policy that the Council adopted and that gives us
the ability where we have the affordable housing project that is being built
as affordable housing. It is not a Market-rate Project that has a couple of
affordable units in it, that we have the ability to waive fees for that
particular housing.
Council Member Wolbach: But that is only, as I heard you read it, that
existing waiver policy only applies to something being built either by a
nonprofit or by government, and which is fully affordable, so it would not
apply to, let’s say a For-profit Developer said I want to build something and
half of it’s going to be Below Market Rate housing, which is almost
impossible and if they said they wanted to do that, the City Manager would
not even be able to provide that fee waiver, in that special and very unlikely
unicorn kind of case because it is so limited.
Ms. Gitelman: A For-profit Developer presumably is making enough of a
profit that they could pay our fees, again, a nominal part of the total cost of
land and construction.
Chair Filseth: Still looking for a second.
Council Member Schmid: I guess I feel that the opportunity of bringing this
up in the Housing Element to say let’s change the wording in the Housing
Element.
Council Member Wolbach: I’ll just respond to that. The Housing Element
doesn’t have the legislative action. It warns of a problem and I am just
trying to make sure we take action to prevent that problem. It sounds like
the Director of Planning and Community Planning is fairly confident that this
is not a problem.
Chair Filseth: I think the Motion fails on account of a lack of a second.
AMENDMENT FAILED DUE TO THE LACK OF A SECOND
Chair Filseth: First of all I think we are talking about how many angels can
dance on the head of a pin, because this is such a tiny fraction of the cost of
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February 2, 2016
doing this thing, but also, I think we should think very differently about
affordable housing versus vast amounts of market-rate housing, so I think to
try to put one thing that covers all those cases, that’s challenging.
Council Member Holman: Can I say something similar to that, which is not
all housing is created equally and if there was some way, and I appreciate
your nod to that.
Chair Filseth: Can I make sure this is on the Finance as opposed to
(inaudible) we could talk about housing and affordable housing for a long
time.
Council Member Holman: I was just going to acknowledge what Cory said
about, Catherine Robuck said about existing housing and retention of it. I
just wanted to acknowledge that.
Chair Filseth: So acknowledged. Can you ready back the Motion, second by
Council Member Holman to recommend to the Council to adopt a schedule
for Planning Fee Increases and Adjustments in hourly rates to better affect
the City’s User Fee Cost Recovery Level Policy with the addition that the
hourly fees would go to 100 perfect in year one and flat fees will go to 100
perfect on a two-year schedule. There was one Amendment which failed
and one that did not proceed to second.
MOTION PASSED: 4-0
Council Member Holman: Before you leave, I had a question about the
Report. Can we do that? On the Report on Page nine it’s general
observations of Planning Community Environment and it talks about, I just
want to get Staff’s responses about the splitting off of Planning from
Development Services and also about the splitting of Code Enforcement and
Code Compliance and I just wanted to see if Staff had some comments it
wanted to make about this because there were no kind of striking
comments.
Ms. Gitelman: Yes, I know (inaudible) and I hope it came through in our
summary that Development Services is undertaking their own Fee Study this
year, and I think they are going to be able to look at some of these issues
and give the (inaudible) and others a recommendation on whether this
restructuring is the right way to go or not. I can’t say anything further
about it right now, but we will continue to look at this issue.
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Council Member Holman: Is it just the, and there is a question for Dan too, if
it is, feel free to respond. It wasn’t clear to me quite if it is just a funding
issue, or if it was also a structural issue.
Mr. Edds: Could you ask that question again?
Council Member Holman: The challenges that are spelled out in the Report
again, on your Report on Page one.
Mr. Edds: My Report, okay.
Council Member Holman: Yes, are they challenges because of how the fees
are charged and collected, or is it also a structural aspect of how
development and planning have been split off of each other. Is it one or the
other or both?
Mr. Edds: That is a good question.
Council Member Holman: That’s what I was trying to ascertain.
Mr. Edds: The challenge that I see is that you have had a large organization
that is now split into two, also which are very complex and so what I am
seeing over in the Development Services side is just, and some of it is
staffing and then split funding of staffing, and where people actually are
working versus maybe where they thought they were working when the split
was made. I would call that structural and what I am seeing is that is
getting worked out. That makes it difficult, both on the management side
but also looking at what an individual service should cost, so I see it more of
a structural thing that is getting worked out in an evolutionary fashion.
Ms. Gitelman: We, on an annual basis, as we prepare our Budget, we work
with the Office of Management and Budget (OMB) and Development Services
to make sure that the revenues and costs between Development Services
and PC are split appropriately. Obviously, revenues and costs need to be in
the same place so you can split them one way or split them the other, but
every year we go through this process of making sure that they are
matching up, and as Development Services undertakes their Fee Schedule
Study, it will be an opportunity to relook at this issue of whether you split
people or split fees, the revenues, so we can look at that. Okay.
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Council Member Holman: Great. And then one last question about the fees
themselves, is, are the Council Members okay if I ask for something to be
clarified when it comes to Council, like where some things have gone, and
about, and it probably should have been asked before the Motion, but I was
(crosstalk) about back at Page 19 for instance where the wireless for some
of these, it just says delete and delete and it’s not clear where they went.
So you don’t have to answer, just if you can clarify when it comes to
Council.
Mr. Lait: And just, in a nutshell, it’s consolidating the fees, instead of having
a whole bunch of Use Permit fees identified. It is the same function, the
same Staff work, whether it’s a Conditional Use Permit (CUP) for one thing
or the other thing, so we are just collapsing all the fees into one general
category. I will explain that in the Report.
Chair Filseth: If we are done with this, I think we can thank the Planning
Department Staff for joining us. Thank you again.
Future Meetings and Agendas
Chair Filseth: We have a meeting next on March 1, 2016. Just to remind the
Committee (Finance Committee). I think most of you know it is the first and
third Tuesday’s of the month. At the moment the (inaudible) states that
your meeting starts at 7:00 P.M. We have to start again on the first
because you have a Closed Session as I have been told, and so it is decided
to have enough time for the Closed Session discussion so there is a request
to keep it at 7:00 P.M. Staff would like to check with you, Chair and the rest
of the Committee is if there would be an interest to start the meetings at
6:00 P.M., so let me as the question. My understanding is that several of us
could do 6:00 P.M. but you have a conflict on the third Tuesday of each
month. Are you 6:00 or 7:00 P.M., do you have a preference?
Lalo Perez, Chief Financial Officer and Director of Administrative Services: I
would defer to Staff’s preference. I would …
Chair Filseth: I would prefer 6:00 P.M. after a long Monday. So let me ask
this, given that Council Member Holman is not available at 6:00 P.M. on the
third Tuesday, it seems to me we should either leave them all at 7:00 P.M.,
or we could have the first Tuesday at 6:00 P.M. and the second Tuesday at
7:00 P.M. Is that too complicated for people?
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February 2, 2016
Council Member Wolbach: Not for us. We will take half. So I take it that
Staff has a preference for 6:00 P.M. where possible?
Mr. Perez: It’s usually easier for us so that we can have a quick dinner and
get ready (crosstalk.)
Chair Filseth: The Motion? (Crosstalk) you and I set the Agenda, so why
don’t we set it for 6:00 P.M. on the first Tuesday of the month and 7:00 P.M.
on the third Tuesday of the month?
Mr. Perez: If we are good with that discussion of the Agenda that we have
tentatively for the first is the mid-year so we have (inaudible) to our Budget
numbers in terms of our expenses and revenues and we will bring that to
you. We also have the much-anticipated draft of the Comprehensive Plan
update for the Fiscal Impact Study and then the beginning of the discussion
for the preliminary financial forecast for all Utility Funds. Hillary, is there an
update on the fiscal?
Hillary Gitelman, Director of Planning and Community Environment: No, I
was just wondering if there is a meeting before March 1, 2016, because we
had Housing Impact Fee.
Chair Filseth: I have one listed here for the 16th.
Ms. Gitelman: We have (inaudible) fees coming on the 16th and the Fiscal
Study on the first.
Mr. Perez: Thank you for that. I skipped 2/16/16. My oversight. We have
the, right now on the Tentative Agenda, the Power Purchase Agreements for
the (inaudible) Palo Alto LLC, the Clean Program update and extension and
the House and Commercial Linkage Fees Nexus Study, so we could flip those
if you wanted.
Ms. Gitelman: You thought User Fees were fine. (Crosstalk).
Chair Filseth: Okay, so why don’t we leave that. Actually that is the 16th, so
that needs to be at 7:00 P.M. The third Tuesday of the month and the, I’m
sorry, can you repeat what was on the first.
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Mr. Perez: The Mid-year and then the Preliminary Financial Forecast for all
Utility Funds, so this is when the discussion starts telling you what they are
projecting for the funds and the Potential Rate Impacts.
Chair Filseth: Got it, and that’s at 6:00 P.M., or is that at 7:00 P.M. as well.
That’s a Closed Session.
Mr. Perez: I’ll go check. (Crosstalk) I think that Closed Session was on the
16th, so I think we are fine, so the first can be at 6:00 P.M.
Chair Filseth: Okay. And then on the 15th we are talking about the Public
Works pool vehicles.
Mr. Perez: That’s correct. The other thing I wanted to give you tonight, and
I know we’re here really late, but it is mostly blank, it’s the May Budget
Hearing calendars, so what we are looking for is for you to take a look at the
schedule and if you don’t mind, Chair, coordinating any absence to those
potential dates, so just to remind you we try to have a meeting on a Monday
and Tuesday of the three week period, have a wrap-up meeting and then
take it to the Council on two nights. Typically what is required is as long as
we have a quorum and we try to have you all on the wrap-up so you can
have a chance to participate if you happen to miss a meeting so you can go
ahead and have a say on anything you miss. So if you can help us
coordinate any dates that are in conflict for you, then the Chair and I can
work on seeing what we can do to make other arrangements.
Chair Filseth: And you would like that as soon as possible.
Mr. Perez: That would be great. And what we do then is we fill in all of the
departments and get the department heads aligned.
Jessica Brettle, Assistant City Clerk: Do you have an extra copy of that?
Thank you.
Council Member Schmid: I think the Policy and Services Committee have a
recommendation to move Committee to Wednesday rather than Tuesday.
Mr. Perez: To my understanding, the Item is still outstanding. It did not get
heard. (Crosstalk.)
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Council Member Wolbach: I think there might be some pull back from that
as well, because Wednesday is the night of a lot of regional meetings and if
we shift our, I was originally in favor until I realized this, that if we shift our
Committee meetings to Wednesday nights, then Council Members would be
(inaudible) to any region body becomes almost impossible or it becomes a
conflict and given our interest in how things our neighbors affect us, that
would probably not be good for Palo Alto.
Mr. Perez: In addition, the Utilities Advisory Commission (UAC) meets on
Wednesday nights.
Council Member Schmid: So we should take these Tuesday/Thursdays as
(crosstalk.)
Chair Filseth: I believe so. You know there may be further discussion by the
(inaudible), but at this point we are assuming we are going to (inaudible).
Okay. Can I ask a couple of things then? So just generally one of the things
that came up earlier, there was a discussion about the Administrative
Penalty Schedule, which I guess gets reviewed once a year. Is that the kind
of thing that comes to Finance?
Mr. Perez: It does. It comes to you as part of the Budget process, which is
the main schedule. So the Fee Schedule will be listed specifically. What we
will do is bring you Staff-recommended changes, and at that point in time
you as the Committee has the opportunity to ask for any updates or changes
on anything else that Staff doesn’t recommend. You’re the one that brought
that up.
Council Member Holman: Yeah, so clarification on that is, so is that a time –
I don’t want to slow down the Budget-hearing process – is that a time or an
earlier time, we should be discussing how we do or don’t assess or collect
the fees.
Mr. Perez: I would say from a financial perspective, that would be the best
time, because you have the whole picture with you. We try to put the Fee
Schedule a little bit later in the Budget Hearings, but even so by then you
are going to have an understanding of where we stand financially, so you
will make an informed decision. And it may be irrelevant to the bottom line,
but that was the thinking of how we structure those hearings.
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Council Member Holman: Can I make a comment, this may be a little bit
counter to that, to me it doesn’t matter and I am not sure that it does to the
community what the cumulative dollar amount is, it is our enforcement
capability and proactive actions in that regard, so is that consistent with any
of the Council Members?
Chair Filseth: My recollection of this process was we did have a discussion
about that about a year ago in May, right, from the perspective of when we
talked about staffing and compliance. I think that was the only discussion
we had on that. We didn’t go more broadly than that.
Mr. Perez: We added a position.
Council Member Holman: So I am a little concerned about slowing down the
Budget process. We are going to have a discussion about collecting penalty
assessments, assessing and collecting. I can see there is so much to go
through during the Budget cycle that it could be not very favorably
reviewed.
Mr. Perez: Let me talk to the City Manager and to Hillary and see what can
be done, because obviously the brunt of the analysis or any work that needs
to be with them, so let me check that. I see some windows in April, so we
will have to take a look at just a matter of checking it with Staff.
Chair Filseth: I wanted to ask the Section 115 discussion, does that come
back to Finance Committee, or is it just going to the 2017 Budget in process.
Mr. Perez: The way we were looking at it, if it is going to be part of your
March 7, 2016 Council meeting discussion, at that point I suppose the
Council could send it back to Finance if there (crosstalk.)
Council Member Schmid: What is the 117?
Chair Filseth: That is the Pension Trust. I noticed on the earlier list there is
a Police Services Utilization and Resources Study.
Mr. Perez: Correct.
Chair Filseth: That’s going to come, to be scheduled.
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Mr. Perez: That’s one where we are working on, there are a couple of items
that are to be scheduled there that we are working on with the departments,
and that’s been a challenging one, as you can tell from the date, and so let
me continue to check in with the department. If you do not hear back from
us, again we have the May Budget Hearings when the Police Budget comes.
Chair Filseth: I understand. Once of the things that came up was in the
National Citizens Survey, it showed that Palo Alto had the highest public
safety expense of any city in the region and I assume that some of that
would get some discussion and we wanted the topic covered.
Mr. Perez: Unfortunately, I don’t have it in front of me, but if it is Public
Safety and it is broad then it includes the Stanford coverage?
Council Member Schmid: That’s because the worker numbers here are so
much higher than the population.
Mr. Perez: We can definitely, (crosstalk.)
Chair Filseth: Per resident.
Council Member Wolbach: It shows a very high per capita because they only
count the residents, not Stanford.
Mr. Perez: One thing that Council Member Schmid has done in the past, and
I think it is appropriate is he correlates that with the long-range in the
Budget discussions (crosstalk.)
Chair Filseth: And then finally, I know you are tired of hearing about this,
but at what point do we discuss a strategy to, right now the unfunded
Actuarial Liability we assess once per year with John Bartel, which doesn’t
enable us to consider that as we do budgeting and cost recovery and staffing
decisions and things like that, but at what point do we look at a strategy to
enable us to actually calculate that on the fly, so that we can use it in
operating decisions.
Mr. Perez: I think it would be appropriate when Mr. Bartel comes before you
on March 7, 2016, to indicate some assignment to the Finance Committee
that you want some further analysis and some template or methodology.
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Chair Filseth: Yeah, I think we need a good table or a template or a model or
something like that. They can’t just send it because, he does fantastic work,
but it takes two months and is expensive.
Mr. Perez: I think that would be my suggestion or recommendation that
would be brought up at that point that you as a Council decide how you want
to handle that and direct it to the Committee or direct it to Staff at that point
if there is agreement.
Council Member Schmid: Yeah, it would have an impact on the Budget.
Chair Filseth: And then, finally, we are through our mechanisms and the City
has a great and appropriate focus on the UAL (Unfunded Actuarial Liability),
but to the best of my knowledge we don’t have a plan to pay down Other
Post Employee Benefit. Is that something that we discuss in Finance
Committee?
Mr. Perez: Absolutely and so we can have that discussion again when we go
through the Budget Hearings, the retire/medical is a subject specific Item
that we discuss the funding and current payment level and we can talk more
about it at that point, but I will give you this much, we are one of the few
cities, we are like top 20 in terms of largest cities in California in that group
that is funding on a regular basis their annual required contribution, but I
think your point is, is that enough, and so that is a discussion we can have.
Chair Filseth: The fear is that it is growing faster. So you said that is during
the budgeting?
Mr. Perez: Right, because we will have a Budget recommendation to you
which right now the current Council policy is to fund the annual required
contribution even though it is not required. It’s one of those catchy things.
Council Member Schmid: If I can put a word in, I guess number 10, is
(inaudible) and I note that the School District has made a decision not to
aggressively develop, so that should put the burden, I guess, back on the
City.
Mr. Perez: I think for that one we do need to come back. I do need to talk
to the City Manager because there is a demand for the space and our largest
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tenant is moving out, so we should Agenda that so we can have a discussion
and update with you.
Council Member Holman: Can I ask a question? I had that one on my list
too. I see it’s on here and I just wondered why it was on Finance.
Mr. Perez: It just comes up as part of the Budget process because of the
significant impact of Foothills moving out and so there are provisions in the
agreement for a Rent Reduction, and so we can explain all of that to you and
the desires of certain members of the community or groups, I’ll call it, for
that space and so there are a lot of issues and so we do need to come to you
and have an update and a discussion.
Council Member Holman: Did that also include, I understand that some
Request for Proposals (RFP) might be going out soon for some nonprofits to
step down with Foothills moving out?
Mr. Perez: It’s not for the Foothills’ space, but other space that is available,
there will be some RFP’s coming up. Anybody that has made it known to us
that they are looking for space, we are adding them to the list.
Council Member Holman: Okay, so what is the timing of that?
Mr. Perez: Let me double check, because there was an update and so it held
up the process so I need to check and let you know.
Council Member Holman: Okay, so there are some nonprofits. Thank you for
that. An then, do I dare mention Zero Based Budgeting and if we could
have a discussion about that and now how we might do it incrementally,
meaning not all departments at once, what that would entail, what an
approach might be, what the advantages and disadvantages are. Are the
Council Members interested in that?
Chair Filseth: This comes up from time to time, right?
Council Member Holman: Yes.
Mr. Perez: This is a significant undertaking that might be, if I may suggest,
that the Chair have a discussion with the City Manager and take it from
there. I don’t feel that I can provide you a response to that on my level. I
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think it needs to be a discussion because of the magnitude of the work and
the implications on the work plans because it is a significant undertaking. I
do note that you are saying phase it in and it is something that I think is a
discussion that needs to be had with the City Manager.
Council Member Holman: Pending that discussion we could Agendize it with
the Finance Committee. There is no way to do it City-wide, it would just be
an enormous undertaking.
Chair Filseth: Let me discuss it with the City Manager and maybe we can
Agendize it after that.
Council Member Holman: You were saying it does come up.
Mr. Perez: It has been asked before.
Council Member Holman: I just wanted to check, this won’t be our last
opportunity to talk about Future Agendas. We do it at the end of every
meeting. We can, hopefully, hear back any thoughts following your
discussion with the City Manager and maybe take it from there.
Council Member Holman: I do have one other question, if I could. Business
Registry, what is the status of the end of Phase Two and when that data
might be coming forward?
Mr. Perez: I can’t answer completely. I apologize, I am not up to date. I do
know that I did see that there is a recommendation for staffing coming to
you for Monday, the 8th, and so there is a discussion in there as to where
they are at and some deadlines. I was working on some other projects and
so I had other Staff look at it and read it and I didn’t get a chance to read it
so I don’t know exactly all the details.
Chair Filseth: With that we move to next, which I guess is adjournment.
ADJOURNMENT: The meeting was adjourned at 8:57 P.M.