Development Services Review. Final Report. Zucker July 2016

Morgan Hill, California

Zucker Systems

Engineering 780,865

28,456 -

260,288

492,121

896,127

182%

Planning

2,500,756 -

130,923 2,369,833 1,292,307 55%

Total

4,746,413 56,922 133,162

130,923 4,165,118 4,665,810 112%

*Based on 1 of 11 staff positions. **Based on 3 of 9 positions.

As can be seen in Table 2. Both Building (190%) and Engineering (182%) exceed

100% full cost recovery and Planning is less than full cost at 55%. This distribution is

not unusual and many developers actually tend to prefer this distribution. We believe

that all three taken together at 112% meet the full cost recovery goal. Nevertheless, it

appears that Planning fees should be increased. As pointed out in this report, there is

need for some increased staffing, particularly in Engineering as well as needed

revenue to build the reserve account.

The City’s desire to recover all of the costs associated with development through fees

is an admirable goal, but we question if it can, or should be, fully achieved. We

believe there are instances when the General Fund should provide supplemental

funding because the service being provided represents an activity that promotes the

greater good of the community. An example of an appropriate General Fund subsidy

would be Code Enforcement and long range planning. The engineering function is

also in Fund 206 even though some of this staff work on CIP projects, public counter

and floodplain management. This cost should be pro-rated back to each of the relevant

CIP projects or the General Fund.

Recommendation:

The budget for development related departments

should include some portion of General Fund dollars to support common

good activities for which a full cost recovery fee is inappropriate.

Fees

Our numerous studies throughout the country have revealed a consistent attitude

expressed by developers that they are more interested in short timelines and clear,

consistent processes than the cost of permits. The permit fees are a very small part of

the project. This attitude, however, is not universally shared by developers when the

subject changes to development impact fees. We will confine our comments to permit

related fees.

The City is currently in the process of having a consultant (NBS) prepare an updated

fee study to validate that the fees being collected for various development related

activities are generating the revenue necessary to cover the cost of those services. We