Development Services Review. Final Report. Zucker July 2016

Morgan Hill, California

Zucker Systems

The Community Development Fund is a special revenue fund used to account for the

collection of planning, building, and engineering fees. The expenditures of these funds

are restricted to the costs associated with processing building, engineering and

planning applications.

General Plan Update Fund (207)

The General Plan Update Fund is a special revenue fund established to account for

the costs of updating the General Plan. The update has been funded by a surcharge

on all planning and building permit fees and by transfers from various funds:

General, Park Development Impact, Community Development, Redevelopment,

Housing, Sewer, and Water. The expenditures are restricted to costs incurred for the

General Plan update.

We commend the City for the way in which the Annual Budget clearly sets forth the

philosophy that development should be required to pay appropriate development fees

to offset the cost of the service being provided.

The building, engineering, and planning functions are funded in a special 206 Fund. A

percentage of permit fees is transferred to a General Plan 207 Fund. The intent is that

these are full cost recovery services funded by fees, which is a best practice.

Community Development Fund 206

Since the fees should normally relate to actual development services, an argument

could be made that certain division expenditures should be funded by the General

Fund. This would include the code enforcement function which is part of building, the

CIP function, public counter and flood plain management which are part of

engineering, environmental programs which are part of building and engineering and

the various Community Development department accounts related to CDBG, housing,

and redevelopment. Table 2 shows the budgets and projected revenues related directly

to development fee revenues and the 206 Fund. We have deducted Environmental

Projects, Code Enforcement, CIP, and the General Plan Update from the budget to

show what cost recovery would be if these items are covered by the General Fund

rather than development fees.

Table 2

Appropriations and Projected Revenues Related to Development Activities, 206

Fund

FY 15-16

Function

Budget

Env.

Proj

Code

Enf.

CIP

Update

Net

Expense

Revenue

Recovery

Building

1,464,792 28,466

133,162

1,303,164 2,477,376 190%