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HomeMy WebLinkAboutA1 Planning Fee Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Wendy Thomas, Director of Community Development SUBJECT: Planning Fee Study Report and Recommendation MEETING DATE: March 2, 2015 AGENDA ITEM TYPE: Action RECOMMENDATION: Direct staff to draft a resolution to approve the proposed Planning Fee Schedule with an adoption date of March 23, 2015. MOTION: I hereby direct staff to bring to the City Commission a Resolution to approve the 2015 Planning Fee Schedule effective March 23, 2015, with a provision to incorporate annual updates to the fee schedule. EXECUTIVE SUMMARY: The review of the planning fees was undertaken in order to update a fee schedule that had not been assessed, or changed, for seven years. The goals is to improve cost recovery as part of a continuing commitment to the citizens of Bozeman to uphold a fiduciary responsibility, to simplify the planning process for all customers, and to continue to offer a level of service that meets community expectations. The study was undertaken using data gathered from SunGard (the City’s computer software program that tracks application review by staff and time), principles based on the budget principles adopted by the City Commission as a part of the annual budget, and past practice by the City to use limited general funds to support the Planning Division. The consultant and staff created the fee schedule based on the following: • Balance the need to serve diverse customers, • Approach cost recovery, • Treat development projects equally, • Support effective and efficient review by investing in technology, skills, and long range planning activities, and • Comply with all legal requirements. The attached study, prepared by Open Window Consulting, recommends a fee schedule that is: • Dramatically simplified and easy to use, • Supportive of cost recovery for the processing of planning applications, • Adding a technology fee, • Adding fees for planning review of building permits, and • Adding a fee for the review of extensions of previously approved by not fully executed projects. 187 The City of Bozeman is fortunate to have a professional planning staff that accomplishes a great amount with limited funding. The review process has improved in terms of efficiency in the last two years. However, if efficiency were the only goal of the department, the review process would be noticeably different. The Planning Division is also committed to community participation and meeting the expectations the community has for development within Bozeman. The proposed fee schedule continues to support the division’s commitment to customer service, efficient service and creating a desirable community for generations to come. The proposed fee schedule has been shared with the Chamber of Commerce, the Southwest Montana Building Industry Association, the Gallatin Association of Realtors and the Inter- Neighborhood Council. The goals for the fee analysis study is to simplify, consolidate and establish City costs to process all types of development applications reviewed by the Planning Division of Community Development. Cost recovery was primarily sought through adjustment to base fees. The aim is move toward cost recovery by erring on the side of under-charging rather than over-charging. Simplification of the fee schedule required the consolidation of fees as they are currently outlined on the existing fee schedule. In some cases where multiple consecutive applications comprise the full development process (e.g., Annexation and Initial Zoning), the fees have been brought together into one fee. The result is the recommendation to the City Commission is to reduce some fees, apply an inflationary adjustment to XX fees and finally to upwardly adjust other fees. The adjustments are show on the attached table. • Where current fees approached cost recovery without inflation adjustment, fees were kept at the present level. This represents a reduction in fees in real-dollar terms. In the case of Commercial/Non-Residential Certificates of Appropriateness, the fee is reduced in nominal terms (from $400 to $250) to better reflect cost of review. • Where inflation adjustment of base fees approached cost recovery, this fee level was proposed. This represents adoption of fees that are unchanged in real-dollar terms. • Where inflation adjusted fees fell significantly short of cost recovery, fees were adjusted by more than the inflation adjuster. Conservative fee increases were proposed to improve cost recovery gradually and to avoid over-charging. • All scaled fees (per acre, dwelling unit, or non-residential square footage) were adjusted for inflation (10.3%). Scaled fees for non-residential space were simplified. To simplify and provide equitable treatment of projects the proposed fee schedule assesses fees only on non-residential square footage (1,000 square feet). • Additional fees were eliminated for some project types, including: $200 for ordinance changes as part of a Zone Map Amendment; per-acre fees for Annexation; scaled fees for Conditional Use Permits; scaled fees for Master Site Plans; and scaled fees for Subdivision Exemptions. The base fees that were arrived at for cost recovery purposes as described above underwent two additional modifications to create the “base fees” to be published in the new fee schedule. In comparing current and proposed base fees, these adjustments should be noted: • Every base fee in the proposed fee schedule includes a 5% Technology Fee. This is a new fee and does not contribute to cost recovery for planning review activities. The fee is 188 requested in order to provide funds for consistent investment in necessary technology improvements that offer mutual benefits to the development community and the City. • A $200 fee for public noticing via the newspaper, which was listed as an additional charge on the current fee schedule, is incorporated as part of the base fee in the new fee schedule. Public comment during the initial presentation of the fee schedule on February 2, 2015 demonstrated the importance customers of Community Development place of efficiency and data to demonstrate how changes in fees, technology and/or process changes directly correlate to improved efficiency. Adoption of cost-based fees, should ensure staff efficiency is accurately measured and reported. The data-driven approach also offers a new ability to gauge, monitor, and improve efficiency because time and cost data are being consistently collected and analyzed. Data on project review times can be analyzed for management purposes, at any time, to provide information and oversight regarding staff efficiency. In addition, upgrades to SunGard will provide an effective mechanism for oversight and efficiency improvement. The Department will look at the data qualitatively as well. Reanalyzing the data in three to five years will allow the Department to seek data based answers to whether an increase or decrease in estimated cost could be explained by: o Particularly difficult and time-consuming planning reviews that have come up; o Changes in staffing or salary levels; o New processes that have been adopted; o Changes in workload; or o The availability of more extensive data over time. • Data analysis for each periodic fee review (every 3-5 years) will allow the Department to quantitatively analyze for: o Cost changes over time for projects and project types o Drivers of cost o Consistency in cost from project to project ALTERNATIVES: 1) Direct staff to draft a resolution to adopt the Planning Fee Schedule as proposed; or 2) Direct staff to draft a resolution to modify the proposed Planning Fee Schedule as directed by the Commission; or 3) As determined by the Commission. FISCAL EFFECTS: Directing Staff to bring back the recommended fee schedule for approval will result in greater cost recovery for planning applications submitted to Community Development. Greater cost recovery will result in savings to the General Fund by reducing the operating subsidy given each year. Revenue results will vary based on application volume. Attachments: Development Review Fee Study & Fee Schedule Revision Fee Schedule Methodology Report Report compiled on: February 24, 2015 189 Open Window Consulting | Comparisons of Proposed Fees to Current Fees 1 Comparisons of Proposed Fees to Current Fees I. Overview of Base Fee Revisions Note that some applications have been consolidated and scaled and multi-tier fees have been eliminated for some application types. Base Fee Reduced (in real or nominal terms) Base Fee Constant in Real Terms (adjusted for inflation) Base Fee Increased in Real Terms Commercial/Non-residential COA Annexation Condominium Review Conditional Use Permits except for Accessory Dwelling Units, Home Based Businesses, and Cabarets Appeals Conditional Use Permits only for Accessory Dwelling Units, Home Based Businesses, and Cabarets Historic Neighborhood (NCOD) Design Review /Residential COA Initial Zone Map Amendment (now included in Annexation) Site Plan Growth Policy Amendment Informal Review Master Site Plan PUD Preliminary Plan PUD Concept Plan Subdivision Exemption UDC Text Amendment PUD Final Plan Subdivision Pre-application (Minor) Zoning Verification Subdivision Preliminary Plat Penalty: Resubmission/Revision Initial Improvements Agreement Subdivision Final Plat Reduction in Security (other than final) Subdivision Pre-application (Major) Impact Fee Deferral Zoning Deviation Penalty: After the fact permitting Zoning Variance Penalty: 3+ Occupancy site inspections Zone Map Amendment (Standard) Sign Permit Review Note: Commercial Reuse, Conditional Use Permit, Special Temporary Use Permit, and Modification To Approved Plan fees have remained constant in some cases and increased in other cases, due to simplification of the fee schedule. 190 Open Window Consulting | Comparisons of Proposed Fees to Current Fees 2 II. Detailed Comparison by Project Type For each type of planning review application, the table below compares the proposed and current base fees, compares the proposed and current scaled fees, and provides the estimated cost of review for reference. Application types correspond to the proposed 2015 fee schedule. *Current Scaled Fees are shown here in a consolidated form. For example, per DU fees listed here combine the published “per DU” and “per DU (long range)” fees. Application Proposed 2015 Base Fee Current Base Fee(s) Proposed 2015 Scaled Fee(s) Current* Scaled Fee(s) Estimated Average Cost to City Pre-Application Consultation 1 Pre-application Consultation with Planning Staff $40 per hour after initial 2 hours N/A -- -- N/A Site Development 2 Master Site Plan $1,775 $1,000 + $200 for advertising -- $50 per DU $125 per non- resid. unit $50 per non-resid. 1,000 sqft $1,629 (1 project) 3 Site Plan $2,100 Prelim + Final = $1,375 $110 per DU $530 per 1,000 ft2 non- residential space Prelim + Final: $85 per DU; $250 per non- resid. unit $60 per non-resid. 1,000 sqft Average Prelim + Final = $2,332 or $2,511 depending on method of calculation Subdivision Development 4 Subdivision Pre- Application (Step 1) $420 minor/ $840 major $500 $40 per lot $25 per lot $726; Major only = $820; Minor only = $375 5 Subdivision Preliminary Plat (Step 2) $1,775 minor/ $2,825 major; PLUS $6.50 noticing fee per physically contiguous property owner $500 minor / $1,000 major + $150 for advertising $70 per lot $75 per lot $3,188; Major only = $3,661; Minor only = $2,147 6 Subdivision Final Plat (Step 3) $1,575 minor/ $2,625 major $500 minor / $1,000 major $70 per lot $50 per lot $1,223; Minor only = $1,133; Major only = $1,253 7 Subdivision Exemption $200 $200 -- $10 per lot 8 Condominium Review (Independent of site development process) $160 $75 -- -- $158 (1 project) 191 Open Window Consulting | Comparisons of Proposed Fees to Current Fees 3 Application Proposed 2015 Base Fee Current Base Fee(s) Proposed 2015 Scaled Fee(s) Current* Scaled Fee(s) Estimated Average Cost to City Planned Unit Development 9 PUD Concept Plan (Step 1) $1,365 $550 -- $10 per DU $10 per non-resid. 1,000 sqft $1,096 10 PUD Preliminary Plan (Step 2) ** $1,565 $1,000 + $200 for advertising $90 per DU $280 per 1,000 ft2 of non- residential space $75 per DU $125 per non- resid. unit $50 per non-resid. 1,000 sqft $1,773 (1 project) 11 PUD Final Plan (Step 3) ** $1,365 $500 $90 per DU $280 per 1,000 ft2 of non- residential space $75 per DU $125 per non- resid. unit $50 per non-resid. 1,000 sqft no data available Annexation 12 Annexation, Including Initial Zone Map Amendment $1,530 $250 annexation + $550 ZMI + $200 advertising for each -- $10 per acre $1,203 for annexation; $1,389 for initial ZMA Appeals 13 Appeal of Administrative Interpretation $830 $500 + $200 for advertising -- -- no data available 14 Appeal of Administrative Project Decision Original application fee plus $200 for public noticing via newspaper Original application fee + $200 for advertising -- -- no data available Zoning Reviews & Design Reviews 15 Commercial Reuse $120 $100/$200 no COA reuse; $200/$300 reuse w/COA; $425 comm. major sketch w/COA; $575 COA/Dev -- -- $105 16 Commercial/Non- Residential COA (Independent of a Site Plan or Reuse application) $325 $400 -- -- $115 (from 69 "COA non- sketch" projects in COA2 review type) 192 Open Window Consulting | Comparisons of Proposed Fees to Current Fees 4 Application Proposed 2015 Base Fee Current Base Fee(s) Proposed 2015 Scaled Fee(s) Current* Scaled Fee(s) Estimated Average Cost to City 17 Historic Neighborhood (NCOD) Design Review / Residential COA $80 $75 - $400 allowed per 2008 Fee Adjustment Resolution -- -- $70 COA1; $153 COA2; $619 COA3 18 Informal Review $265 per Board $100 per DRC, DRB, WRB; $200 per Planning Board, Zoning Commission -- -- $501 19 Zoning Deviation $210 each $50 or $100 per Dev/Var -- -- No data available 20 Zoning Variance or Subdivision Variance $1,775 $800 SFH / $1,300 all other + $200 advertising -- -- $1,481 (two projects) 21 Conditional Use Permit (CUP) $1,460 $685 for ADU/Home- based business; $875 for Cabaret; $1,500 for all others + $200 advertising for each -- $50 per DU $125 per non- resid. unit $50 per non-resid. 1,000 sqft $1,082 without 2 cost outliers that have Dev/Var ($1,278 with outliers) 22 Special Temporary Use Permit $160 per week $100 one week / $250 > one week -- -- $245 (two projects, presumably > one week) 23 Comprehensive Sign Plan Review $215 No fee -- -- $203 24 Zoning Verification $90 $75 -- -- no data available 25 Regulated Activities in Wetlands no fee No fee -- -- no data available Regulatory Changes 26 Zoning Map Amendment (non-Annexation) $1,775 $1,000 + $150 for advertising + $1,000 if ordinance change needed $55 per acre $55 per acre up to 80 + $25 per acre thereafter + $25 per acre if ordinance change needed $1,677 without one extreme outlier ($2,330 with the outlier) 27 UDC Text Amendment $1,585 $1,200 + $200 advertising -- -- $1,737 ($1,351 for the only application- driven ZCA) 193 Open Window Consulting | Comparisons of Proposed Fees to Current Fees 5 Application Proposed 2015 Base Fee Current Base Fee(s) Proposed 2015 Scaled Fee(s) Current* Scaled Fee(s) Estimated Average Cost to City 28 Growth Policy Amendment $2,825 $2,500 + $200 for advertising $30 per acre If Growth Policy Map is amended $25 per acre IF Growth Policy Map is amended $1,949 Penalty / Special Consideration Fees Re2 9 After the Fact Permit $290 in addition to all other applicable fees $250 in addition to all other applicable fees -- -- no data available 30 3rd and Subsequent Submission of Revised Materials 1/4 of total original application fee 1/4 of total original application fee -- -- no data available 31 Modification / Amendment to Approved Plan $265 $25 minor; $250 final site plan mod -- -- Revised to $154 (plus re- advertising); $133 for minor; $186 final plan mod 32 3rd or Subsequent Occupancy Site Inspection $115 $100 -- -- no data available 33 Extension of Approved Plan $325 if City Commission approval is required; $95 all others No fee -- -- Staff conservatively estimates 5 hours of work if Commission approval is needed; 1.5 hours otherwise 34 Initial Improvements Agreement (IA) $460 OR 1 percent of face value, whichever is greater Greater of $400 or 1% of face value -- -- no data available 35 Reduction in Security (other than final) $230 $200 -- -- no data available 36 Impact Fee Deferral $60 $50 -- -- no data available The following abbreviations are used: UDC = Unified Development Code; DU = Dwelling Unit; COA = Certificate of Appropriateness; NCOD = Neighborhood Conservation Overlay District; ECOD = Entryway Corridor Overlay District *Current Scaled Fees are shown here in a consolidated form. For example, per DU fees listed here combine the published “per DU” and “per DU (long range)” fees. 194 Open Window Consulting | Comparisons of Proposed Fees to Current Fees 6 Planning Review Fees for Building & Sign Permits Permit Type Proposed 2015 Planning Review Fee Current Fee Estimated Average Cost to City 37 Sign Permit Review $25; $125 if in Overlay District Generally $126 in Overlay District; $26 for all others $43 38 Residential Building Permit Review $50 -- $43 39 Commercial/Industrial Building Permit Review $105 -- $96 195 C ITY OF B OZEMAN DEVELOPMENT REVIEW FEE STUDY & FEE SCHEDULE REVISION JANUARY 14, 2015 PREPARED BY: Open Window Consulting, LLC 229 Silver Cloud Circle Bozeman, MT 59715 (406) 624-6972 Julie@OpenWindowConsulting.net www.OpenWindowConsulting.net 196 2 TABLE OF CONTENTS TABLE OF CONTENTS .............................................................................................................................................. 2 I. INTRODUCTION .................................................................................................................................................. 3 2015 PLANNING REVIEW FEE PRINCIPLES ........................................................................................................................... 3 II. SUMMARY OF RECOMMENDED FEE SCHEDULE REVISIONS FOR 2015 ................................................................ 4 III. COST ESTIMATIONS AND COST-RECOVERY ....................................................................................................... 7 IV. RECOMMENDATIONS REGARDING FUTURE FEE SCHEDULE ADJUSTMENTS ...................................................... 9 V. RECOMMENDED IMPLEMENTATION ACTIONS ................................................................................................... 9 APPENDIX A: PROPOSED 2015 PLANNING REVIEW FEE SCHEDULE ....................................................................... 11 FEE SCHEDULE FOR PLANNING REVIEW APPLICATIONS ............................................................................. 12 APPENDIX B: COMPARISON OF PROPOSED 2015 FEES AND EXISTING FEES .......................................................... 15 APPENDIX C: ADDITIONAL DOCUMENTS PROVIDED TO THE DEPARTMENT OF COMMUNITY DEVELOPMENT ..... 20 197 3 I. INTRODUCTION Open Window Consulting was contracted by the City of Bozeman to study the development review fees charged by the Department of Community Development (“DCD” or “the Department”) and provide recommendations for changes. The Department reviews all proposed developments to assure that they are in compliance with the City’s Unified Development Code and compatible with the City’s growth policy. The Department assesses fees for the review of development applications in an effort to defray the cost of conducting the review, to recover the cost of any mandated public noticing via newspaper, and to support long-run planning activities. Bozeman’s current review fee schedule has been in place since 2008. The proposed 2015 Planning Review Fee Schedule is found at Appendix A. The Department has undertaken the planning review fee study to update fees that have been unchanged for seven years; to improve cost recovery so as to uphold its fiduciary responsibility to the citizens of Bozeman; and to simplify the fee schedule to make it more understandable for applicants and to improve fee collection. As part of this process, a set of revised principles were developed to guide fee setting. 2015 PLANNING REVIEW FEE PRINCIPLES Planning review fees should: 1. Balance the needs of the Department of Community Development’s diverse customer groups, and serve each one well. The customer groups served by Department include project applicants, the current citizens of Bozeman, and the future citizens of Bozeman. 2. Approach full cost recovery for the City of costs attributable to development reviews so as to relieve the general taxpayer and the General Fund from costs originated by specific requests, to the greatest extent feasible. 3. Treat all development projects – large and small, residential and commercial – equitably. 4. Discourage some behaviors, including violations of standards, seeking of special exceptions without compelling reason, submitting applications that are incomplete or require multiple re- submissions, and appeals of administrative decisions. 5. Assess fees throughout the development process so that expenses for large projects are distributed to multiple points and reflect, to a degree, the ability of the applicant to recover the costs in a timely manner. 198 4 6. Support the effectiveness of City planning and the efficiency and cost-efficiency of planning review processes by investing consistently in the necessary technologies, skills, and long-range planning activities. 7. Comply with legal requirements affecting fee amounts. These principles are grounded in the City’s vision – “Bozeman – the most livable place.” They reflect and support the City’s financial policies of collecting and using user fees rather than general taxes, where appropriate and feasible. The resulting recommended fee schedule is greatly simplified from the perspective of the applicant and moves toward a more accurate cost basis for fees. It fosters the City’s vision by directly supporting its goals of providing “quality customer service” and providing “excellent and equitable public services which are responsive to the community within available resources,” as well as anticipating “future service demands and resources deficiencies and [proactively] addressing them.”1 II. SUMMARY OF RECOMMENDED FEE SCHEDULE REVISIONS FOR 2015 A proposed fee schedule that incorporates the following revisions is attached at Appendix A. A comparison of the old and new fee schedules is also provided, at Appendix B. Below, we summarize the key elements of the proposed fee schedule, how they compare to the previous fee schedule and how they serve the City’s vision, goals and policies. Fee Schedule is simplified. Working closely with planning staff, the fee schedule was simplified and restructured to make it easier for applicants to understand and use. Application types have been reduced in number and grouped by the type of activity the applicant is pursuing. For each type of project application, the schedule lists a clear base fee and, where applicable, a scaled fee based on the number of lot, dwelling units, or commercial space. Applicants are notified that additional fees may apply (see next). City planning staff will calculate the total fee for applicants. The applicant is no longer required to determine whether the project will require deviations, variances, or relaxations of code, a Conditional Use Permit, or a Certificate of Appropriateness. Rather, the burden of responsibility for making these determinations and accurately calculating the total fee is placed upon the Community Development Department. The fee schedule explicitly notifies applicants of possible additional fees and encourages them to communicate with planning staff. We strongly recommend that each applicant be issued a clearly itemized invoice for the total fee. The improved clarity will foster more accurate fee collection by the City and supports the City’s goals of improving customer service to applicants. 1 See the City of Bozeman’s mission, vision, goals, and financial policies for revenue collection, most recently published in the Approved Budget for Fiscal Year 2015, pages 28 and 33, available at http://www.bozeman.net/Business/Budgets-and-Financials. 199 5 A fee is established for “Pre-Application Consultation with Planners.” This is a new charge intended to achieve cost recovery and reduce subsidization for pre-application consultation that can in some cases be significant. The Department will open a file on each potential applicant that seeks consultation with planners. Initial consultation of up to two hours will be provided free of charge, after which consultation time will be billed at $40 per hour and invoiced upon submission of a formal application. This billable rate is a blended fully burdened productive hourly rate for all planners. Planning staff will track time spent in consultation using the SunGard system. The invoiced amount must be paid before application review will begin. Planning staff expect that for most applicants the two hours will be sufficient to obtain all the needed pre-application guidance. This free consultation provides a mutually-beneficial dialog between planners and applicants that facilitates submission of complete and accurate applications that can be reviewed efficiently. The fee charged after two hours will address the past problem of some applicants that return to City planners for excessive amounts of guidance and consultation to develop an application. In these cases, the City’s planning staff supplants the use of private sector planners at sometimes significant cost to the City. To date, the Department of Community Development has had no means by which to charge an applicant for this cost; thus the cost was born inappropriately by the General Fund and the taxpayer. This situation also disadvantaged those applicants who secured the services of their own planning professionals rather than taking excessive advantage of support from the City planning staff. The Pre-Application Consultation fee is compatible with the City’s finance policy of adopting user fees when distinct beneficiaries can be identified. Further, the use of the existing SunGard system makes implementation cost effective and administratively feasible. The new fee serves the City’s goal of providing “excellent and equitable public services” by providing planning staff support equitably to all applicants and eliminating the benefit that some applicants have gained through the over-use of City planning staff. A 5% Technology Fee is applied to all base fees. This new surcharge will provide consistent investment in necessary technology improvements that offer mutual benefits to the development community and the City. The technological landscape of the community planning profession holds important best practices that cannot be ignored, including the expanded use of Geographic Information Systems (GIS) and a move toward paperless processes. GIS has become an essential tool for land use management and community planning, offering clear and usable information of value to both planners and developers. Eliminating paper improves efficiency and offers significant cost reductions for applicants as well as the city. A paperless environment has been adopted by not only large cities, but also smaller communities including Gillette, Wyoming. As Bozeman continues along a strong growth trajectory, it will become ever more important to modernize its land management and planning processes. Adopting these best practices will require significant investment in equipment, software, and staff training in the coming years. One of the City’s seven goals is to “anticipate future service demands and resource deficiencies and be proactive in addressing them.” Toward this end, the Community Development Department proposes to establish a Technology Fund, similar to the existing Long-Range Planning Fund, through which resources can be accumulated gradually and consistently to support these 200 6 investments. The adoption of a small technology surcharge on planning applications will reduce the need for large or erratic increases in funding from fee increases or the General Fund to support technology improvements. It will allow the City to make steady improvements in planning technology; improve predictability for City finances and fee-paying applicants; spread the cost of technology improvements over time; and assure that the costs – like the benefits – are shared by the City and the developer community. New or revised fees will be applied to building and sign permits to cover the cost of planner reviews. A flat fee will be assessed for commercial and residential building permits, sign permits, and comprehensive sign plans. These fees will be assessed and collected by the Building Division as part of the permitting process. The flat fee for sign permits replaces a current planning review fee that is based on the value of the sign. The fee level has been set to approximate the fees currently paid by sign applicants. The other permitting fees are new fees, adopted to address the previously unrecovered cost of time spent by planners to review these permits. New fees will be applied when extensions are requested for approved plans. Currently the City charges no fee for these requests and the staff time required to review them. Two fee levels are established: one for extensions that must be approved by the City Commission, and a lower fee for those that do not require City Commission approval. Both fees are calculated using conservative estimates of the staff time required. Base fees are adjusted for inflation and improved cost recovery. Existing fees were first adjusted for inflation, adding an adjuster of 10.3% (2008-2014).2 Cost data were then used to consider whether these fees would reasonably recover the cost of reviews. In some cases the adjusted fees were far below the cost estimate. This is likely a function of the low cost of labor used to set fees in 2008 and perhaps also a reflection of more accurate estimates of staff time due to improved use of SunGard. Cost estimations based on currently available data are likely still under-estimated because the SunGard system has not been calibrated perfectly to the needs and practices of the department and staff may not consistently log their time. We have found no factors that would contribute to an overestimation of cost. As a result, fees could be expected to increase further over the next two to five years as more accurate and complete cost data is collected. To achieve cost recovery through fees, in support of the City’s finance policies, the application fees should be cost-based to the degree possible. In future, as cost data improves, the City can update these fees with annual inflation adjustments and periodic adjustments based on cost analysis. Mandated fees for public noticing via newspaper have been incorporated into the base fees to reduce the complexity of the fee schedule for applicants. These fees were previously referred to as “advertising fees” and recover the actual cost. 2 The Bureau of Labor Statistics’ Consumer Price Index (CPI) inflation calculator was used. 201 7 Scaled fees based on lots/dwelling units/commercial space were adjusted for inflation and presented in a simplified form for applicants. The revised scaled fees have two components: one portion that goes into the long-range planning set-aside fund; and one portion that defrays the cost of reviewing project. On the previous schedule these were listed separately. The Department will allocate the funds received to the separate accounts internally. Fees on non-residential space have been simplified, assessed per 1,000 square feet but not per "non-residential unit". The adjusted fees remain within the statutory limits of $50 per residential lot or unit and $250 for each non-residential lot or unit (76-1-410(2) MCA). The use of 1,000 square feet as a “unit” to assess the fee for non-residential space should comply with statute, and will avoid favoring large commercial spaces over small ones. The more equitable treatment of projects and the simplification of the published fees contributes to the City’s goal of improving customer service. Additional fees for deviations, variances, and relaxations of code have been standardized across project types. Previously the additional cost to applicants varied across project types. This additional fee is particularly important as current cost data suggests that review costs rise with the addition of deviations/variances/relaxations. As cost data improves over time, it should be analyzed for this correlation. The fees help recover the cost of additional staff time and serve to discourage such exceptions to code. Fees for Certificates of Appropriateness (COA) have been standardized across projects. The COA can be requested alone or as an additional component to a development project. It contributes resources for the overlay planning fund as well as cost recovery revenues to address the more extensive planning review needed for projects in an Overlay District. Penalty fees remain for incomplete applications, revisions to applications, after-the-fact applications, and additional Occupancy Site Inspections. The fees help recover the cost of additional staff time and also discourage these behaviors. Fees are also retained for special considerations including impact fee deferral, reductions in security, and initial improvement agreements. In the absence of available relevant cost data, most of these fees have been simply adjusted for inflation. Fees for regulatory changes have been adjusted. Fees for amending the Growth Policy or Unified Development Code have been adjusted for inflation. Fees for Zoning Map Amendments have been simplified and increased to provide improved cost recovery. III. COST ESTIMATIONS AND COST-RECOVERY Because the City sought to improve cost recovery through its planning review fees, an important component of the fee revisions was the analysis of available cost data. While a detailed description of the cost estimation methodology has been provided to the Community Development Department, several key improvements on previous cost estimations are worth noting here. 202 8 First, the analysis was data-driven to the extent possible. Understanding the true cost to the City of conducting planning reviews was fundamental to meeting the Department’s cost-recovery objective and the fee principles. In recognition of this, the planning staff has worked since 2012 to begin tracking the person-hours required to review development applications, using the City’s existing SunGard system. It must be noted that this data collection effort has faced several very natural hurdles – the off-the-shelf SunGard software as deployed does not always meet the specific data collection and analysis needs of the Department; and comprehensively logging the time of salaried staff is a challenging new practice to implement in any setting. As a result, the available cost data is sometimes incomplete and revenue data is sometimes aggregated in ways that prevents its use. This data, nonetheless, offers important insights that have been useful in revising the review fees for 2015. Furthermore, our analysis of the data has identified important modifications that can be made to the set-up and use of the SunGard system so that data collected in future years will be more accurate, reliable, and useful. Second, to translate labor hours into costs, both direct labor costs and indirect (overhead) costs were considered. Direct labor costs were calculated using productive hourly rates rather than simple “wage + benefits” rates. This current best practice offers a more accurate calculation of costs as it accounts for the “non-productive” time that is inherent in any salaried position (paid holidays, vacation and sick leave, and training time). Markups were then calculated to recover three important categories of indirect costs: Departmental overhead, City Central Services overhead, and overhead costs resulting from operating several advisory boards that exist only to review projects (the Development Review Committee, the Design Review Board, the Wetlands Review Board, and the Planning Board). By using productive hourly rates and capturing indirect costs, the analysis comes closer to capturing the true cost to the City of conducting development reviews. Cost estimates were averaged for each project type and were considered against the fees charged under the current published fee schedule.3 Considering only base fees, only four project types achieved average cost recovery. Caveats must be made to this result, however, due to the weaknesses of the currently available data. Costs are most likely underestimated because planning staff do not consistently log all time spent on a project and non-DCD staff rarely log the time they contribute to projects. 3 Cost estimates were also compared to revenue data captured in SunGard, using scatter plots to examine costs versus revenues for individual projects by project type. However, we caution that the revenue data from SunGard is aggregated in ways that make it inadequate to the task. In adjusting fees, we have therefore looked to the published fees to assess the level of current cost recovery. In future, such scatter plots generated from more accurate data could provide many useful insights. 203 9 IV. RECOMMENDATIONS REGARDING FUTURE FEE SCHEDULE ADJUSTMENTS We recommend that, in the future, the City (i) annually adjust all fees for inflation and increases in noticing costs4, and (ii) periodically conduct a cost-recovery analysis and adjust fees accordingly. As a matter of efficiency, we recommend that the Department be granted authority to make annual inflation adjustments based on the Consumer Price Index (CPI) without the approval of the Commission. It is common to conduct a full review of the fees every 3-5 years. However, because data collection is expected to improve significantly over the next few years, Bozeman should consider conducting a full cost recovery analysis annually for the next three years to capture the benefits of this data collection effort. We expect that current cost estimations are likely low, therefore annual reassessments would likely improve cost recovery more quickly and avoid undercharging for planning review services over the next 3-5 years. We have provided the Department with a description of a methodology for estimating costs, which should allow them to perform this review in-house if they wish. Future cost-recovery analysis should compare average project costs to the cost-recovery revenues collected through application fees for each project type. We recommend that it also consider how widely costs vary within a project type, seek to identify key drivers of variable review costs so that they can be addressed in the fee structure, and seek to identify potential efficiency improvements in the review process. In order to conduct effective cost-recovery analyses in the future and set fees that achieve cost recovery, it will be imperative that the SunGard system be set up to capture data in a way that facilitates analysis and that Department and out-of-Department staff involved in the review process begin as soon as possible to comprehensively log time spent on planning reviews. We have provided the Department of Community Development with more detailed technical recommendations regarding the calibration of SunGard to meet their needs, updating cost factors, evaluating cost-recovery, and adjusting fees to improve cost recovery. Two excel workbooks have been provided that will guide the Department through cost updates and cost-recovery analyses. The documents provided to the Department are listed in Appendix C. V. RECOMMENDED IMPLEMENTATION ACTIONS To support implementation of these fees, we recommend that the City: 1. Recalibrate the SunGard system to facilitate data collection and analysis 2. Establish a Planning Technology Fund 204 10 3. Create an “Agreement to Pay” document, through which the potential applicant agrees to pay for additional consultation with city planners, beyond the two hours provided free, at a stated hourly rate 4. Adopt the practice of providing all applicants with an itemized fee invoice to ensure transparency and accountability 4 The City is required to give notice to adjacent and nearby landowners via newspaper, certified mail, or first class mail, per municipal code (§38.40.030). 205 11 APPENDIX A: PROPOSED 2015 PLANNING REVIEW FEE SCHEDULE See next page. 206 Fee Schedule for Planning Review Applications Effective tbd, 2015 Project application fee must include all relevant fees from the fee schedule. Please contact the Planning Division staff if you need assistance with fee estimation. The Department of Community Development will make the final, binding calculation of applicable fees for each application. Applicants will be responsible for any additional noticing costs required under Bozeman municipal code. Application Type Base Fee Scaled fee by project size Pre-Application Consultation - If these charges are incurred, the fees must be paid prior to final project approval. 1 Pre-application Consultation with City Planners $40 per hour after initial 2 hours Site Development 2 Master Site Plan $1,775 3 Site Plan $2,100 $110 per DU; $530 per 1,000 ft2 non-residential space Subdivision Development 4 Subdivision Pre-Application (Step 1) $420 minor/ $840 major $40 per lot 5 Subdivision Preliminary Plat (Step 2) $1,775 minor/ $2,825 major; PLUS noticing fee of $6.50 per physically contiguous property owner $70 per lot 6 Subdivision Final Plat (Step 3) $1,575 minor/ $2,625 major $70 per lot 7 Subdivision Exemption $200 8 Condominium Review (Independent of site development process) $160 Planned Unit Development 9 PUD Concept Plan (Step 1) $1,365 10 PUD Preliminary Plan (Step 2) $1,565 $90 per DU; $280 per 1,000 ft2 of non-residential space 11 PUD Final Plan (Step 3) $1,365 $90 per DU; $280 per 1,000 ft2 of non-residential space Annexation 12 Annexation (Including Initial Zone Map Amendment) $1,530 Appeals 13 Appeal of Administrative Interpretation $830 14 Appeal of Administrative Project Decision Original application fee plus $200 for public noticing via newspaper 207 13 Application Type Base Fee Scaled fee by project size Zoning Reviews & Design Reviews 15 Commercial Reuse $120 16 Commercial/Non-Residential COA (Independent of a Site Plan or Reuse application) $325 17 Historic Neighborhood (NCOD) Design Review / Residential COA $80 18 Informal Review $265 per Board 19 Zoning Deviation $210 each 20 Zoning Variance or Subdivision Variance $1,775 21 Conditional Use Permit (CUP) $1,460 22 Special Temporary Use Permit $160 per week 23 Comprehensive Sign Plan Review $215 24 Zoning Verification $90 25 Regulated Activities in Wetlands no fee Regulatory Changes 26 Zoning Map Amendment (non-Annexation) $1,775 $55 per acre 27 UDC Text Amendment $1,585 28 Growth Policy Amendment $2,825 $30 per acre If Growth Policy Map is amended Penalty / Special Consideration Fees - If these charges are incurred, the fees must be paid prior to final project approval. 29 After the Fact Permit $290 in addition to all other applicable fees 30 3rd and Subsequent Submission of Revised Materials 1/4 of total original application fee 31 Modification / Amendment to Approved Plan $265 32 3rd or Subsequent Occupancy Site Inspection $115 33 Extension to Approved Plan $325 if City Commission approval is required; $95 all others 34 Initial Improvements Agreement (IA) $460 OR 1 percent of face value, whichever is greater 35 Reduction in Security (other than final) $230 36 Impact Fee Deferral $60 Abbreviations: UDC = Unified Development Code; DU = Dwelling Unit; COA = Certificate of Appropriateness; NCOD = Neighborhood Conservation Overlay District; ECOD = Entryway Corridor Overlay District 208 14 Planning Review Fees for Building & Sign Permits These fees will be assessed and collected by the Building Dept. as part of the permitting process. No planning application is needed. Permit Type Planning Review Fee Sign Permit Review $125 if in Overlay District; $25 all others Residential Building Permit Review $50 Commercial/Industrial Building Permit Review $105 209 APPENDIX B: COMPARISON OF PROPOSED 2015 FEES AND EXISTING FEES Item # Application ‡ Base Fee* Scaled fee by project size † Estimated Average Cost to City Base Fee(s) on 2014 Schedule Pre-Application Consultation 1 Pre-application Consultation with Planning Staff $40 per hour after initial 2 hours N/A N/A Site Development 2 Master Site Plan $1,775 $1,718 (1 project) $1,000 + $200 for advertising 3 Site Plan $2,100 $110 per DU; $530 per 1,000 ft2 non- residential space Average Prelim + Final = $2,472 or $2,920 depending on method of calculation Prelim + Final = $1,375 Subdivision Development 4 Subdivision Pre-Application (Step 1) $420 minor/ $840 major $40 per lot $766 (most betw $300 & $600; Median = $553); Major only = $865; Minor only = $395 $500 5 Subdivision Preliminary Plat (Step 2) $1,725 minor/ $2,775 major; PLUS $6.50 noticing fee per physically contiguous property owner $70 per lot $3,362 (most betw $1,500 & $3,500, median = $2,913); Minor only = $2,264; Major only = $3,861 $500 minor / $1,000 major + $150 for advertising 6 Subdivision Final Plat (Step 3) $1,575 minor/ $2,625 major $70 per lot $1,289; Minor only = $1,195; Major only = $1,321 $500 minor / $1,000 major 7 Subdivision Exemption $200 $200 8 Condominium Review (Independent of site development process) $160 $167 (1 project) $75 Planned Unit Development 9 PUD Concept Plan (Step 1) $1,365 $1,155 $550 10 PUD Preliminary Plan (Step 2) ** $1,565 $90 per DU; $280 per 1,000 ft2 of non- residential space $1,870 (1 project) $1,000 + $200 for advertising 210 16 Item # Application ‡ Base Fee* Scaled fee by project size † Estimated Average Cost to City Base Fee(s) on 2014 Schedule 11 PUD Final Plan (Step 3) ** $1,365 $90 per DU; $280 per 1,000 ft2 of non- residential space no data available $500 (3 step total = $2,050) Annexation 12 Annexation, Including Initial Zone Map Amendment $1,530 $1,269 for annexation; $1,466 for initial ZMA $250 annexation + $550 ZMI + $200 advertising for each Appeals 13 Appeal of Administrative Interpretation $580 no data available $500 + $200 for advertising 14 Appeal of Administrative Project Decision Original application fee plus $200 for public noticing via newspaper no data available Original application fee + $200 for advertising Zoning Reviews & Design Reviews 15 Commercial Reuse $120 $111 Reuse $100/$200 no COA reuse; +$100 reuse w/COA; $425 comm Major sketch COA; $575 COA/DEV 16 Commercial/Non-Residential COA (Independent of a Site Plan or Reuse application) $325 $119 (from 69 "COA non- sketch" projects in COA2 review type) $250 (from 2008 Fee Resolution) 17 Historic Neighborhood (NCOD) Design Review /Residential COA $80 $70 COA1; $153 COA2; $619 COA3 $75 - $400 allowed per 2008 Fee Adjustment Resolution 18 Informal Review $265 per Board $529 $100 per DRC, DRB, WRB; $200 per Planning Board, Zoning Commission 19 Zoning Deviation $210 each No data available $50 or $100 per Dev/Var 20 Zoning Variance or Subdivision Variance $1,775 $1,562 (two projects) $1,300 / $800 SFH + $200 advertising 211 17 Item # Application ‡ Base Fee* Scaled fee by project size † Estimated Average Cost to City Base Fee(s) on 2014 Schedule 21 Conditional Use Permit (CUP) $1,460 $1,141 without 2 cost outliers that have Dev/Var ($1,348 with outliers) $685 for ADU/Home- based business; $875 for Cabaret; $1,500 for all others + $200 advertising for each 22 Special Temporary Use Permit $160 per week $258 (two projects, presumably > one week) $100 one week / $250 > one week 23 Comprehensive Sign Plan Review $215 $203 No fee 24 Zoning Verification $90 no data available $75 25 Regulated Activities in Wetlands no fee no data available no fee Regulatory Changes 26 Zoning Map Amendment (non-Annexation) $1,775 $55 per acre $1,768 without one extreme outlier ($2,458 with the outlier) $1,000 plus $150 for advertising 27 UDC Text Amendment $1,585 $1,832 ($1,424 for the only application- driven ZCA) $1,200 plus $200 advertising 28 Growth Policy Amendment $2,825 $30 per acre If Growth Policy Map is amended $2,056 $2,500 plus $200 for advertising Penalty / Special Consideration Fees 29 After the Fact Permit $290 in addition to all other applicable fees no data available $250 30 3rd and Subsequent Submission of Revised Materials 1/4 of total original application fee no data available same 31 Modification / Amendment to Approved Plan $265 $162 (plus re- advertising); $140 for minor; $196 final plan mod $25 minor; $250 final site plan mod 32 3rd or Subsequent Occupancy Site Inspection $115 no data available $100 212 18 Item # Application ‡ Base Fee* Scaled fee by project size † Estimated Average Cost to City Base Fee(s) on 2014 Schedule 33 Extension to Approved Plan $325 if City Commission approval is needed; $95 all others Staff conservatively estimates 5 hours of work if Commission approval is needed; 1.5 hours otherwise No fee 34 Initial Improvements Agreement (IA) $460 OR 1 percent of face value, whichever is greater no data available greater of $400 or 1% of face value 35 Reduction in Security (other than final) $230 no data available $200 36 Impact Fee Deferral $60 no data available $50 ‡ The following abbreviations are used: UDC = Unified Development Code; DU = Dwelling Unit; COA = Certificate of Appropriateness; NCOD = Neighborhood Conservation Overlay District; ECOD = Entryway Corridor Overlay District Planning Review Fees for Building & Sign Permits Item # Permit Type Planning Review Fee Scaled Fee Estimated Average Cost to City Previous Fee 36 Sign Permit Review $25; $125 if in Overlay District -- $46 Generally $126 in Overlay District & $26 for all others 37 Residential Building Permit Review $50 -- $46 -- 38 Commercial/Industrial Building Permit Review $70 -- $69 -- 213 20 APPENDIX C: ADDITIONAL DOCUMENTS PROVIDED TO THE DEPARTMENT OF COMMUNITY DEVELOPMENT The following additional materials were provided to the Department to guide future analysis and fee schedule adjustments: 1. Technical Recommendations for Future Fee Adjustment and Cost-Recovery Analysis 2. Billable Labor Rate Workbook (Excel) 3. Cost Recovery Workbook (Excel) 4. Allocation of Collected Fees Workbook (Excel) 215 DRAFT 02/03/15 1 Prepared for: Bozeman City Commission February 4, 2015 Prepared by: Open Window Consulting, LLC 229 Silver Cloud Circle Bozeman, MT 59715 (406) 624-6972 Julie@OpenWindowConsulting.net OpenWindowConsulting.net METHODOLOGY: Cost Estimation & Fee Adjustment For the Planning Review Fee Study 216 DRAFT 02/03/15 2 CONTENTS I. Cost-Based Fee Setting........................................................................................................................... 3 II. Detailed Cost Estimation Methodology........................................................................................... 4 Hourly Direct Labor Cost Calculations ............................................................................................ 4 Overhead (Indirect) Cost Calculations ............................................................................................ 5 Fully Burdened Productive Hourly Labor Rates ......................................................................... 9 Planning Review Cost Estimations and Cost-Recovery Evaluations .................................. 9 III. Cost-Based Fee Adjustments ............................................................................................................. 11 Appendix: Available Data and Limitations ............................................................................................................. 13 217 DRAFT 02/03/15 3 I. COST-BASED FEE SETTING The Department of Community Development (DCD) is seeking to adopt planning review fees that better recover the costs, so as to reduce the need for General Fund contributions toward these activities. In an era of shrinking tax support, municipal governments nationwide are trending toward the use of fees to recover the cost of work that offers benefits to specific, identifiable users. The cost recovery approach is generally adopted because it offers both financial sustainability and equity. The cornerstone of cost recovery is the accurate assessment of the costs involved in providing the service. Traditionally, the City of Bozeman has considered the cost of planning reviews using a very simple wage cost of labor and staff estimates of the time required to process applications. The DCD is now moving toward a more sophisticated approach that better reflects the true cost of the activities, with logging of time spent in the SunGard system. Drawing upon established private sector financial practices, the Department has sought through this fee study to estimate the Cost of Services (COS) as a starting point for fee setting. This more refined estimate of cost (i) uses a more accurate per-hour cost of staff time and (ii) includes associated operating expenses (“indirect costs” or “overhead”). The detailed methodology for estimating the cost of planning reviews is provided below (section II). This estimation of cost does not preclude any policy decisions regarding the desire to underwrite planning review activities with public funds, but it does allow the City to take such decisions with better information regarding the actual cost of conducting planning reviews, the degree of public funding, and the likely fiscal impact of those policy decisions. While overhead is a part of the true cost of providing planning reviews, whether to include overhead in costs to be recovered or to support these costs with the General Fund is a policy decision. Open Window Consulting was asked to include both Department and City Central Services overhead in our calculations of cost recovery. A third cost area that was treated as overhead is the cost of administering four Advisory Boards that exist for the sole purpose of contributing to planning reviews. These costs are solely attributable to planning review activities, but cannot reasonably be allocated to individual application reviews. The adjustment of fees based on the resulting cost estimates is discussed in section III. If the City determines not to recover some or all of the overhead costs, we can adjust the proposed fee schedule accordingly. The planning review fee study was a data-driven study. The primary sources of data include data from the City’s SunGard system; the City’s approved budget documents (FY2012, FY2013, and FY2014); and the planning review fee schedule currently in place. All data sets have limitations. In the Appendix to this document, we have outlined the limitations of the available data for this study as well as the methods used to address them and the implications for the resulting proposed fee schedule. 218 DRAFT 02/03/15 4 II. DETAILED COST ESTIMATION METHODOLOGY To evaluate the current level of cost recovery for the City of Bozeman’s development review activities, our analysis sought to estimate the direct and indirect costs associated with project reviews through the following steps: 1. Calculate more accurate hourly labor costs by converting individual hourly wage rates into productive hourly rates; 2. Calculate appropriate blended labor rates to estimate costs that reflect which staff contribute to specific review activities; 3. Calculate overhead costs (“indirect costs” or “operating expenses”) and the “fully burdened” labor rates to recover those costs; 4. Estimate the cost of conducting individual project reviews using logged hours and blended labor rates for each project step; and 5. Estimate average cost per project for each project type. Following is a detailed description of the methodology used. This methodology was provided to the Department in the form of an Excel workbook, so that it can be used for future fee adjustments. HOURLY DIRECT LABOR COST CALCULATIONS For each staff member, a productive hourly rate was calculated. This is a fundamental best practice for calculating unit labor cost. It captures the true cost of labor because it accounts for the fact that a salaried employee does not actually work 2,080 hours per year. Rather, the employee will have a certain amount of “non-productive” time, including paid annual and sick leave, paid holidays, and training time. Thus the cost of each productive hour should be used to calculate the hourly cost of the salaried employee. DCD provided hourly wage and benefit costs for each staff member as well as the following information: Employees receive 15 days of annual leave, 12 days sick leave, 11 paid holidays, 8 hours general training. Planners certified by the American Institute of Certified Planners (AICP) also receive 24 hours of AICP training per year. Annual sick leave was included at 75%, as is typical in calculating productive annual hours. Thus: Calculate annual productive hours for each staff position: 2,080 – (paid holidays + annual leave + 75% of sick leave + training days) = either 1,768 or 1,792, depending on whether AICP training was relevant to the position Calculate the productive hourly cost of labor: (Hourly wage with benefits x 2,080) / Annual productive hours = Productive hourly rate The resulting productive hourly rate is 17.7% higher than the wage+benefits rate for the seven staff with AICP training, and 16.1% higher for the three staff who do not. 219 DRAFT 02/03/15 5 OVERHEAD (INDIRECT) COST CALCULATIONS Several categories of overhead were estimated in an attempt to capture the full cost to the City of providing the planning review services for specific applications. These include: departmental overhead costs, overhead costs derived from City central services, and the overhead costs involved in operating several advisory boards that review projects. DEPARTMENTAL OVERHEAD The Department’s allocable overhead costs include operating expenses, capital expenses, and office space. Operating and Capital Expenses are drawn from the Approved Budget for Fiscal Year 2015: Department Operating Expenditures = $170,788 Department Capital Expenditures = $0 Office space costs were calculated using the following information provided by the Department: 6,608 ft2 Office space square footage x $ 14 Valuation per square foot used by the City = $ 92,512 Departmental office space expense The DCD overhead expenses were summed and distributed across all DCD labor expenses (valued in the Approved Budget at $758,750): FY15: ($170,788 + $0 + $92,512) / $758,750 = 34.70% The same calculation was made for FY13 and FY14 (holding the amount and value of office space constant, drawing operating and capital expenditures from the Approved Budget). A 3-year average was then calculated to address the year-on-year variability in overhead and labor costs: FY14: ($192,688 + $12,500 + $92,512) / $577,791 = 51.52% FY13: ($100,261 + $0 + $92,512) / $643,274 = 29.97% Three year average ratio: 38.73% A markup of 38.7% could be added to all labor rates to recover the cost of Departmental overhead. CITY CENTRAL SERVICES OVERHEAD City central services include the City Commission, City Manager, City Attorney, Administrative Services Department, and Administrative Office Space. They are currently allocated across several Funds (General Fund, four Enterprise Funds, and the Stormwater, Building Inspection, and Vehicle Maintenance Funds) but no allocation is made to the Community Development and Planning (CDP) Fund. For full cost recovery, the City should include an overhead markup for City Central Services in the hourly rates it charges for client work. The Central Services overhead can be calculated as follows: 220 DRAFT 02/03/15 6 Calculate the Department’s “share” of central services costs by calculating DCD labor expenses as a portion of all city labor expenses in FY15 (values taken from the Approved Budget): $ 758,750 Total Department Salaries & Benefits ÷ $27,608,270 Total City of Bozeman Salaries & Benefits = 2.75% Calculate a 2.75% share of the FY15 central services expenses (valued at $3,197,098 in the Approved Budget): $3,197,098 x 0.0275 = $87,920 Divide this cost across total FY15 DCD labor costs (from the Approved Budget): $87,920 / $758,750 = 11.59% The same calculation was made for FY13 and FY14 (drawing relevant values from the Approved Budget). A 3-year average was then calculated to address the year-on-year variability in costs: To address the year-on-year variations in costs, calculate a three-year average: FY14: $577,791 / $25,792,995 = 2.24% $2,806,867 x .0224 = $62,874 $62,874 / $577,791 = 10.88% FY13: $636,926 / $23,726,401 = 2.68% $2,186,884 x .0268 = $58,608 $58,608 / $636,926 = 9.20% Three year average ratio: 10.56% A markup of 10.6% could be added to all labor rates to recover the cost of city central services. OVERHEAD COSTS ASSOCIATED WITH OPERATING REVIEW BOARDS The cost was estimated for administration of the Development Review Committee (DRC), the Design Review Board (DRB), the Wetlands Review Board (WRB), and the Planning Board. The administration of these boards is an “indirect cost” of planning reviews. It is an overhead expense because: 1. Their costs are an “indirect” cost associated with conducting planning reviews. If no one submitted a planning review application, these Boards would not need to exist. [N.B.: The costs of administering the Zoning Commission were not included in the calculation because this body’s mandate includes both project review and policy matters.] 2. These costs cannot reasonably be allocated to specific project applications. 221 DRAFT 02/03/15 7 Cost of Holding Development Review Committee (DRC) Meetings The DRC meets consistently for two hours each week and are consistently attended by six core members representing the Public Works Department; the Department of Parks, Recreation, & Cemetery; the Fire Department; and the Building Division of the Department of Community Development. The cost of attendance by non-planning staff is a fixed indirect cost associated with planning reviews. Using wage rates provided by DCD, a productive hourly rate (no overhead) was calculated for each of the six non-planning city staff. We assumed 1,792 productive hours per year, based on the standard leave package for City employees. Only non-planning staff were included in this calculation, as planning staff time is captured by the hours logged in the SunGard system. Also note that the private sector member of the DRC (representing NorthWestern Energy) are not included in this calculation as (s)he participates at no cost to the City. The resulting costs were summed, as shown in Table 1, below. Table 1. Hourly Labor Costs for Non-Planning City Staff Members on the Development Review Committee (anonymized) Hourly Hourly Rate with Benefits Hourly Productive Rate $ 34.98 $ 46.00 $ 53.39 $ 34.98 $ 46.18 $ 53.60 $ 36.75 $ 48.20 $ 55.95 $ 33.29 $ 47.46 $ 55.09 $ 33.29 $ 47.46 $ 55.09 $ 28.71 $ 37.08 $ 43.04 Total hourly cost of DRC meetings $ 316.16 The annual cost of operating the DRC was then calculated using a meeting length of 2 hours and an estimated 48 meetings per year (based on a review of past agendas online). ($316.16 /hr) x (2 hrs/mtg) x (48 mtg/yr) = $30,351. Cost of Administering Four Relevant Advisory Boards (DRC, DRB, WRB, Planning Board) Because the Design Review Board, Wetlands Review Board, and Planning Board are comprised of community volunteers there are no out-of-department staff costs associated with these meetings. However, there are administrative costs associated with planning review by each of these boards, as well as the Development Review Committee. Each of the four advisory bodies is administered by the DCD and staff hours are logged to “Advisory Board Support” in SunGard. We arrived at an annualized estimate of these administrative costs by summing all logged staff hours for the three quarters for which data was provided (FY2013 Q3 and Q4; FY2014 Q1) and multiplying by 1.33 to annualize the hours. We then applied a blended 222 DRAFT 02/03/15 8 productive hourly rate for the three staff members that contributed to this work ($41.30 per hour). The blended rate was un-weighted as logged hours could not be linked to specific staff. 250.73 total hours logged in SunGard x 1.33 = 333.47 hrs/year estimated 333.47 hrs/year x $ 41.30 blended hourly rate = $13,771.20 annual estimated administrative cost of advisory boards for planning review Unlike departmental overhead costs, these two cost items were allocated to the planning division, not to the full department, because they are relevant only to the planning division. Thus, the total of the two costs is distributed across the total annual salaries & benefits of the ten planning employees (calculated as wage+benefit hourly rate times 2,080 hours). $ 13,771 per year for administration of five advisory boards + $ 30,351 per year out-of-department labor costs for DRC meeting attendance = $ 44,123 overhead associated with review boards ÷ $ 714,854 total annual planning staff salary & benefits = 6.2 % A markup of 6.2% could be added to all labor rates to recover the cost of operating four advisory boards that perform planning reviews. This includes a markup of 1.93% for administration of advisory boards and a markup of 4.25% for non-Department DRC meeting attendance. 223 DRAFT 02/03/15 9 FULLY BURDENED PRODUCTIVE HOURLY LABOR RATES For each member of the planning staff, a fully burdened productive hourly rate was calculated by incorporating overhead costs. The productive hourly rates were increased by the three overhead markups totaling 55.5%. The table below shows the impact upon hourly costs when fully burdened productive hourly rates are used. (The value of each overhead markup is shown, so that the increased cost attributable to each can be easily seen.) Table 2. Development of Fully Burdened Productive Hourly Rate Position Hourly Wage + Benefits Annual Productive Hours Productive Hourly Rate Additional Cost of Overhead: Fully Burdened Productive Hourly Rate (including 55.5% overhead) Department Overhead (38.7%) City Central Services Overhead (10.6%) Advisory Board Overhead (6.2%) Support Staff $ 18.81 1792 $ 21.83 $ 8.45 $ 2.31 $ 1.35 $ 33.95 Support Staff $ 24.02 1792 $ 27.88 $ 10.79 $ 2.96 $ 1.73 $ 43.35 Planner $ 35.66 1768 $ 41.95 $ 16.24 $ 4.45 $ 2.60 $ 65.24 Planner $ 28.40 1792 $ 32.96 $ 12.76 $ 3.49 $ 2.04 $ 51.96 Planner $ 28.45 1768 $ 33.47 $ 12.95 $ 3.55 $ 2.08 $ 51.35 Planner $ 43.19 1768 $ 50.81 $ 19.66 $ 5.39 $ 3.15 $ 79.01 Planner $ 29.12 1768 $ 34.26 $ 13.26 $ 3.63 $ 2.12 $ 53.27 Planner $ 43.56 1768 $ 51.25 $ 19.83 $ 5.43 $ 3.18 $ 79.69 Planner $ 36.86 1768 $ 43.36 $ 16.78 $ 4.60 $ 2.69 $ 67.43 Director $ 55.61 1768 $ 65.42 $ 25.32 $ 6.93 $ 4.06 $ 101.73 PLANNING REVIEW COST ESTIMATIONS AND COST-RECOVERY EVALUATIONS Using the fully burdened productive hourly rates and the hours logged by planning staff, we first estimated a review cost for each project application in the clean data set. For each “step” in the project review process a blended hourly rate was calculated from the fully burdened productive hourly rates of all staff members that could work on that step. An unweighted average was calculated: (Sum of fully burdened productive hourly rates of all relevant staff) / # of relevant staff For each project, the step costs were calculated and summed. Hours logged for step x blended rate for step = Labor cost of step Sum of labor cost for all steps in project = Labor cost of project 224 DRAFT 02/03/15 10 Cost recovery was primarily evaluated through base fees. • For each project type, the cost estimates for all projects were plotted using scatter plots and examined in regard to (i) the degree of variation, (ii) their relation to current base fees. Below is an example: • An average cost of planning reviews was then calculated for each project type and considered against the base fees currently charged. In the example above, the average cost of reviewing Informal Review applications was $548, or $431 if two cost outliers were removed from the analysis. The base fee charged was $100. • Current base fees were adjusted for inflation by adding 10.3% (Consumer Price Index inflation adjustment for 2008-2014, as of December 2014) and these adjusted fees were also considered against average cost estimates for each project type. 225 DRAFT 02/03/15 11 III. COST-BASED FEE ADJUSTMENTS Cost recovery was primarily sought through adjustment to base fees. The aim in all cases was to approach the estimated average cost while erring on the side of under-charging rather than over-charging. Please note that the potential contribution of scaled fees was considered to the extent possible with the very limited data available. Note also that in many cases simplification of the fee schedule required consideration of current fees for multiple application types that were being consolidated. In some cases where multiple consecutive applications comprise the full development process, the fees have been distributed differently across the applications. For example fees for a Planned Unit Development have been assessed mostly on the preliminary plan application (step 2 of 3), while the current proposal spreads fees evenly across the concept, preliminary, and final plan applications. • Where current fees approached cost recovery without inflation adjustment, fees were kept at the present level. This represents a reduction in fees in real-dollar terms. In the case of Commercial/Non-Residential Certificates of Appropriateness, the fee is reduced in nominal terms (from $400 to $250) to better reflect cost of review. Seven application types fall into this category. • Where inflation adjustment of base fees approached cost recovery, this fee level was proposed. This represents adoption of fees that are unchanged in real-dollar terms. Eleven application types fall into this category. • Where inflation adjusted fees fell significantly short of cost recovery, fees were adjusted by more than the inflation adjuster. Twelve application types fall into this category. Rather conservative fee increases were proposed, to improve cost recovery gradually and to avoid over-charging. • All scaled fees (per acre, dwelling unit, or non-residential square footage) were adjusted for inflation (10.3%). Scaled fees for non-residential space were simplified. Current fees are assessed on both the number of (undefined) “residential units” and “1,000 non-residential square feet” in a proposed development. To simplify and provide equitable treatment of projects the proposed fee schedule assesses fees only on non-residential square footage (1,000 square feet). • Additional fees were eliminated for some project types, including: $200 for ordinance changes as part of a Zone Map Amendment; per-acre fees for Annexation; scaled fees for Conditional Use Permits; scaled fees for Master Site Plans; and scaled fees for Subdivision Exemptions. The base fees that were arrived at for cost recovery purposes as described above underwent two additional modifications to create the “base fees” to be published in the new fee schedule. In comparing current and proposed base fees, these adjustments should be noted: • Every base fee in the proposed fee schedule includes a 5% Technology Fee. This is a new fee and does not contribute to cost recovery for planning review activities. The Department of Community Development requested the addition of this fee to provide consistent investment in necessary technology improvements that offer mutual benefits to the development community and the City. 226 DRAFT 02/03/15 12 • A $200 fee for public noticing via the newspaper, which was listed as an additional charge on the current fee schedule, is incorporated as part of the base fee in the new fee schedule. This affects the published base fee for ten application types. (In the case of Annexation applications, two such fees ($400) are incorporated because advertising is required for both the annexation and the zone map amendment, which are now combined in one application.) Fees collected for each planning review will need to be distributed internally by the Department to the appropriate account (Technology Fund, Long Range Planning Fund, Overlay District Planning Fund, and revenues available for cost recovery). We have provided an excel workbook that can guide this distribution by breaking out the components in each published fee. A portion of the worksheet is shown below: Figure 1. Excerpt of Fee Allocation Workbook Application or Fee Type Published Base Fee Components of Base Fee Published Scaled Fee #1 Components of Scaled Fee #1 … Newspaper Noticing Long- Range Planning Fund Overlay District Fund Tech. Fund (5% rounded) Cost- Recovery Revenues Long- Rang Planning Fund Cost- Recovery Revenues Minor Subdivision Preliminary Plat 1,775.00 200.00 -- -- 75.00 1,500.00 70.00 per lot 35.00 per lot 35.00 per lot … 227 DRAFT 02/03/15 13 APPENDIX: AVAILABLE DATA AND LIMITATIONS The current fee schedule was used to provide data on fees charged to past projects. This data has notable limitations springing from the complexity of the fee schedule. With multiple scalable and contingent fees, it is difficult to ascertain the fees that would be paid for a “typical” application. Indeed, DCD seeks to simplify the fee schedule in part because applicants find it difficult to determine the fees due. We addressed this limitation in some cases by considering the details of some recent projects – for example, examining how many acres have been involved in recent annexation applications and thereby gaining insights into what impact the scalable portion of the fee might have on the total annexation review fee. The SunGard data was used primarily to estimate the cost of reviewing past projects. One general limitation of the available data is that for some project types the Department has processed a very small number of applications, making it more difficult to draw conclusions that are statistically reliable. Statistical reliability will improve over time as more data is accumulated. Standard data cleaning involved the removal of any projects that lacked complete staff time data to remove any reviews that are still in process or with otherwise incomplete data entry. This data cleaning reduced the universe of projects that could be analyzed. The SunGard data on staff time has one notable limitation: the under-reporting of time spent by City staff. Staff who are outside the Department of Community Development but who are involved in the planning review process rarely or never log their time on this activity. DCD staff hours may also be under-reported. Some projects removed for incomplete data had been closed out, but had no time entry for specific step(s) in the review process. The absence of time logged may be due to staff spending zero or negligible time on that step in the review process; however, in some cases it may be due to staff failing to log time that was spent. The number of projects with no time entered for some steps suggests that staff time may also be under-reported in the projects that were examined, which would result in a low estimation of review costs. Because conservative estimates of cost are preferred – so as to avoid overcharging applicants – this underestimation of cost is not detrimental to the fee study. Because the Department has begun logging staff time relatively recently, we expect that data entry will improve over time, particularly with the sustained commitment of managers. Ideally, one would compare the cost of reviewing an application to the fees collected for that review. Unfortunately, within SunGard the fees collected are aggregated in ways that prevented this straightforward comparison. Fees paid by applicants include some monies that do not offset review costs, including pass-through payments for public noticing via newspaper and fees to be deposited in the City’s Long Range Planning Fund. These different fee components could not be fully disaggregated to accurately gauge the current degree of cost recovery. For this reason, we turned to the existing fee schedule to give an indication of current cost recovery. With adjustments to the SunGard system, disaggregated project-specific revenue data could offer easier and more accurate assessments of cost recovery. 228