Palo Alto overhauls development fees | News | Palo Alto Online |


Palo Alto overhauls development fees

City says new schedule will help ensure fairness, cost recovery

The cost of doing business in Palo Alto is about to change for builders, home renovators and creators of parade floats -- in some cases significantly so -- under a newly approved overhaul to the municipal fee schedule.

The City Council on Monday night voted 7-1, with Councilman Greg Tanaka dissenting and Mayor Greg Scharff absent, to change more than a hundred fees pertaining to building and permit applications, add nearly 30 new building fees, and to approve a 5 percent fee hike that would fund a new reserve at the Development Service Department.

The idea behind the new fee schedule is simple: Fees should reflect the amount of time and money that the city spends on performing the service. Today, that is often not the case. Fees for building permits are based on "valuation," which means that redesigning a lavish home to add gold-plated fixtures costs significantly more than a modest structure with the same exact square footage and number of rooms. Given that Development Services staff do the same amount of work inspecting either building, the fees will now be identical and based on the methodology of the International Code Council.

As a recent Development Services report puts it: "Construction values can vary even though the cost to the City in providing a plan check and inspection services may not."

"This ordinance standardizes that, equalizes that, treats everyone fairly and allow us to base our fees on the amount of time it takes do the work," Development Services Director Peter Pirnejad told the council Monday.

The switch to the common standard is just one of dozens of changes that the council approved to the fee schedule. In many cases, the new fee will be lower than the current one. A permit for construction and demolition of multi-family projects, for example, will go from $412 today to $305 under the new fee schedule. A re-inspection fee for multifamily and residential and nonresidential projects will drop from $315 to $137. The new schedule also includes lower fees for inspection, plumbing and gas piping fixtures. (The fee changes can be viewed here.)

But other fees will increase -- in some cases, dramatically and seemingly unpredictably. A permit for a parade float will go up from $122 per hour to $351. And a permit for a tent or air-supported structure will rise from $307 to $734.

These numbers perplexed Tanaka, who called some of the proposed changes "bizarre." Is the city really trying to discourage floats and go after "bouncy houses," he asked? (Pirnejad assured him that his staff will not inspect bouncy houses.) Tanaka also marveled that the fee to inspect motor generators is set to go up from $75 to $441; even though the cost of inspecting a motor would go down from $75 to $58.

"The spirit of this is right, but when you look at the numbers -- it's not right," Tanaka said. "It doesn't make sense."

Others were satisfied with staff's explanation for the wide variation in fees. The city had recently completed the second phase of a cost-of-service study, which re-examined all the fees, analyzed the workload associated with each fee and helped develop the new cost structure. The council's Finance Committee previously vetted the staff proposal and unanimously recommended adopting the new fees.

Councilman Eric Filseth, who chairs the committee, said Monday that the idea of aligning fees with the costs makes sense.

"If our fees are lower than the actual cost to the city, someone else has to pay the difference," Filseth said. "This approach bases fees on what it actually costs the city, as opposed to what it costs the applicant -- which is how we're based on some of our fees now."

Councilman Cory Wolbach said the fee changes made him "uneasy." Unlike his colleagues, he saw nothing wrong with having a developer of a "gold-plated" home pay more than someone whose means -- and project -- are considerably more modest. And even though the council adopted in 2015 a goal of making development services revenue-neutral, Wolbach questioned whether this should be the aim of development services.

"Libraries aren't cost-for-service; police isn't cost-for-service -- it's kind of a regressive policy. ... We might want to think if we're going too far down the road with cost-for-service," Wolbach said.

The council also approved the creation of a reserve fund for the Development Services Department, which will come from a 5 percent increase in development fees annually over five years. The fee will result in a reserve of about $3 million to $4 million, according to staff. This would obviate the need for the city to dip into the General Fund, which pays for most basic city services (not including utilities), Pirnejad said.

The new reserve would also "allow active continuous improvement programs to be completed or phased down in an organized fashion," according to a report from Development Services.

"Furthermore, it will allow Development Services Department to maintain highly skilled staff to ensure that key projects stay on schedule, which correlates to earlier economic recovery," the report states.


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13 people like this
Posted by OMG
a resident of Downtown North
on Oct 3, 2017 at 10:03 am

I almost fell out of my chair when I saw this:
Carnivals and Fairs ($189 to $1456)

My local school will definitely feel the impact!

How is this keeping up with inflation?

31 people like this
Posted by Dan
a resident of Midtown
on Oct 3, 2017 at 11:32 am

Rather than reflecting the amount of time and money that the city spends on performing the service, it would be better for these fees to reflect the value added by the city service. Then almost all of the fees would drop dramatically and most things wouldn't require any permit at all.

28 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Oct 3, 2017 at 11:34 am

Online Name is a registered user.

How great that developers of multi-family structures are getting fee breaks while schools and other civic-minded groups won't. NOT.

19 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Oct 3, 2017 at 11:45 am

Online Name is a registered user.

PS: Dan above is exactly right that this should be a fee-for-service proposition,

Why has the city suddenly become a part owner of our homes and their appreciation first with the document transfer tax and now this? If they were providing enhanced services for residents, I might understand.

Their priority should be providing cost-effective services, not treating us like cash cows while they keep devising more and more fees and surcharges to fund their out-of-control spending.

39 people like this
Posted by Allen
a resident of Old Palo Alto
on Oct 3, 2017 at 11:48 am

Why is it that everytime I read something my city council does I get the feeling they work for developers and not for the citizens? Do the city council members get some kind of kick back or campaign financing that is more important than representing their voters? Sure seems like it.

11 people like this
Posted by Garden Gnome
a resident of Crescent Park
on Oct 3, 2017 at 12:43 pm

"Fees should reflect the amount of time and money that the city spends on performing the service."

"A permit for a parade float will go up from $122 per hour to $351."

So if the time per hour isn't changing (this is Palo Alto, so perhaps not a valid assumption), is the city really spending more money performing this service?

23 people like this
Posted by absurd
a resident of Mayfield
on Oct 3, 2017 at 12:59 pm

Don't raise fees on fun for kids. That's just absurd. Raise the fine for the construction violations. That's what they should raise because those happen oh so often.

10 people like this
Posted by WTF
a resident of Menlo Park
on Oct 3, 2017 at 2:19 pm

I had to check to see it wasn't April 1 today. This is material worthy of The Onion.

15 people like this
Posted by Doris
a resident of Duveneck/St. Francis
on Oct 3, 2017 at 3:46 pm

This needs more work. Seems very regressive to me.

8 people like this
Posted by Eric Blair
a resident of Crescent Park
on Oct 4, 2017 at 12:04 pm

Newspeak .... Overhaul really means a big cost increase

The farther the word is from the original meaning the more extreme it is, and bigger cheat to citizens.

6 people like this
Posted by C
a resident of College Terrace
on Oct 4, 2017 at 4:20 pm

What is that saying? You deserve the government you vote for, or in democracy you get the government you deserve? Something like that. Keep voting the same, and you get more of the same. Was anyone surprised when the article said 'about to change'? How is it that the comments board 100% in agreement, yet our local leaders think this serves the community somehow?

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