AGENDA #10c

 

BUDGET WORKING PAPER

 

TO:                  W. Calvin Horton, Town Manager

 

FROM:            Roger S. Waldon, Planning Director

 

SUBJECT:       Development Application Fees

 

DATE:             April 27, 2005

 

 

You have asked for suggestions regarding how Chapel Hill’s development application fees might be adjusted.  We offer the following information, along with a suggestion for increasing fees.  We estimate that an increase in fees of the type suggested here might increase revenues from these fees by approximately $40,000 - $50,000.  The increased revenues would come from increased fees paid by applicants.  Estimates of revenues from fees are always very imprecise, because it is impossible to predict with certainty what applications might be initiated in any given year.

 

Recent History of Application Fees

 

Revenue from application fees fluctuates significantly from year to year, with little predictability.  There is no way to project how many or what kind of applications might be submitted in any given year.  The history of revenues from Development Application Fees along with our current estimates for this year and projections for next year, are as follows:

 

2001-02:          $ 233,399

2002-03:          $ 168,400

2003-04:          $ 367,124

2004-05:          $ 209,930 (estimated)

2005-06:          $ 203,700 (projected)

 

The last time we significantly raised application fees was during the 2000-2001 fiscal year.  Budget Working Papers reviewing our application fee schedule were prepared in 2000, 2003, and 2004. 

 

The Council’s previous policies in constructing a fee schedule for development applications have included the following points:

 

• In general (except as modified below), try to recover 100% of direct costs of processing development applications.

 

• Keep application fees for certain types of applications low (at levels below our direct costs).  Those types of applications include:

 

1. Board of Adjustment Variances and Appeals
2. Historic District Certificates of Appropriateness
3. Home Occupation Permits
4. Zoning Compliance Permits for Single-Family and Two-Family dwellings

 

• Provide reduced fees for Places of Worship and Nonprofit Organizations (50% reduction).
• Waive all development review fees if 100% of dwelling units meet affordable criteria.

 

• The staff work that is accounted for in the structuring of the fee schedule includes the work of all Town departments involved in review of major development applications, from the time an application is originally submitted through the time that the application has been approved for construction, and a Zoning Compliance Permit has been issued.  Our estimates have included staff time from the Planning, Inspections, Engineering, Fire, and Public Works Department, along with work by the Town Attorney and Town Manager’s office.  This estimate of staff time involved also includes, for the Public Works Department, the time spent in inspection of construction.  Other staff time involved in inspection of construction is covered by other fees:  by a Building Permit fee for building inspections, and by an Engineering Construction Permit fee for inspections of construction by our Engineering Department.  None of this accounts for fees paid to the Orange Water and Sewer Authority, or the School Impact Fees paid to Orange County. 

 

• The Current fee schedule has a cap of $60,000 for any initial application fee, and a cap of $30,000 for any final plan review.  

 

• The public cost that was accounted for in the most recent fee study did not account for overhead costs such as office and building maintenance, computers, utility costs for Town Hall, etc. The calculations were based on staff time (salaries and benefits for staff costs) and direct costs of supplies, ads, and mailings.

 

• The public cost that was accounted for focused on costs directly attributable to processing applications, and did not include staff time devoted to general maintenance of development regulations, general information to citizens, and general support to Advisory Boards and the Town Council.

 

• The fees have not been significantly adjusted in 3 years.  New, more stringent standards have been put in place since that time, requiring additional review time. 

 

Suggestions for Fee Adjustments

 

We believe that it would be reasonable and justifiable to increase fees by approximately 10-25% across the board, following consideration of the staff time involved in processing each type of application.  We also believe that it would be reasonable to reconsider the policy to keep some fees below the costs of providing services (as outlined above), and set most fees according to the costs of providing the services. (The exception being applications where 100% of new dwelling units would meet the Town’s affordable housing criteria).

 

Accordingly, we suggest consideration of the following:

 

• Increase fees by approximately 10-25% across the board.

 

• Increase the fee cap for large applications, from the current $60,000 maximum fee to a $75,000 maximum fee.

 

• Eliminate the 50% reduction provision for applications from Places of Worship and Nonprofit Organizations.

 

• Provide a fee waiver for applications from a Nonprofit Organization that proposes 100% affordable housing.

 

We believe that these actions, outlined above, could be undertaken immediately, with no need for a study to justify the increases.  The increases outlined above are modest and easily justifiable, given the following considerations:

 

1. Three years have passed since the fees were originally justified, without significant fee increases in any of those years.

 

2. The most recent calculations of the costs for providing these services did not include any consideration for indirect costs such as building maintenance, utilities, and computers.

 

3. Development standards and processes became more rigorous in 2003, increasing the staff time required to administer regulations.

 

A marked-up fee schedule is attached, showing these changes.

 

We had projected that, for the 2005-06 fiscal year, revenues from application fees would be approximately $204,000 (an unreliable projection; could be low or high).  If the changes shown on the attached sheet were to be implemented, we would estimate that an additional $40,000 - $50,000 in revenues might be realized for the 2005-06 fiscal year.

 

Additional Idea – Formal Study

 

An option available to the Town Council is to commission a detailed study of the Town’s application fee schedule.  The advantage of doing this would be to provide a rigorous basis for setting application fees.  Disadvantages of doing this are the following:

 

• We believe that fees can be increased without such a study, justified for the reasons offered in this paper.

 

• Chapel Hill’s development application fees currently are very high, in comparison to other North Carolina communities.  We believe that there may be public policy reasons for not increasing the fees substantially beyond their current settings.

 

• The cost of performing such a study is significant.  A recent proposal from a consultant to perform such a study indicates that the cost would approach $40,000, not including a substantial commitment of staff time to obtain data for a consultant.