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Home / News / Construction and Real Estate / Fees slated to take a hike: City counting on increased development service charges to fight budget deficit

Fees slated to take a hike: City counting on increased development service charges to fight budget deficit

CHARLOTTE – Increases in regulatory service fees that could bring in an additional $1.4 million to help offset about $21.7 million in revenue losses were presented last week to the City Council, which is expected to vote on its budget June 8.

Service fee increases are one of several ways the city is tackling the budget shortfall for fiscal year 2016, in addition to expense reductions and possibly a property tax rate increase that would replace the city’s trash-disposal fee for residential properties.

A couple of development fees could double.

“We hope that the current challenges with the budget don’t shortchange any of us as a (development) community because there are strategic things that need to be accomplished,” said Chris Thomas, chair of the Commercial Real Estate Development Association’s Legislative Committee who is also a partner at Childress Klein Properties in Charlotte. He cited as an example the rewriting of the city’s zoning ordinance.

The deficit largely is a result of two factors: an ongoing revaluation of all Mecklenburg County properties that has resulted in the lowering of many appraisals, which is estimated to cost the city $10.8 million in property-tax revenue, and the state General Assembly’s elimination last year of the business privilege license tax, an $18.1 million loss.

Of the city’s 14 departments, seven offer regulatory services, and all regulatory service agencies operate on a combination of fees collected from customers and funds from the city’s general budget. Most regulatory service fees are development related, for processes including rezoning, plan review, inspection and permitting.

 

Pay more, get more?

At a City Council budget workshop Wednesday, Councilman Kenny Smith of District 6 said that if development service fees were going to be increased, the city should improve its services as well.

He also questioned the timing of the increase, given that the future structure of some of the development services offered by the city and Mecklenburg County is up in the air.

The city and county are currently creating a timeline for implementing changes to the processes. The changes were recommended in a report by global information technology research firm Gartner Inc., which the city and county hired to evaluate the processes after receiving many complaints. The company handed over its final report in March and its recommendations are projected to take three years to implement.

“I think if we’re going to have that increase, I’d like to see if we can actually have some of the improvements recommended from the Gartner report, and actually give them a better service level,” Smith said at the meeting.

In the report, Gartner suggested the city and county better organize and allocate their tasks and services by restructuring their development service departments and creating a joint city-county advisory committee. Customers who Gartner interviewed for the report said they were confused about which agency offered which services.

The Mecklenburg County Land Use and Environmental Services Agency oversees the county’s Code Enforcement Department, which handles building plan reviews, permitting and inspections countywide. The Land Development Division within the city’s Engineering and Property Management Department handles services related to raw land development within city limits.

Joe Padilla, executive public policy director the Real Estate and Building Industry Coalition in Charlotte, said he wouldn’t be opposed to higher fees if the money were going toward improving development services. But that’s not the case; the fees are being increased so the city won’t have to contribute as much money to regulatory service agencies using funds from the general budget.

“It’s one thing when you’re paying for a higher price to get better service, but when you’re paying a higher price for a service that’s lacking in a lot of areas and really needs improvement, that’s really a tough pill to swallow,” Padilla said.

Complete cost recovery

The city has been working to make all regulatory services self-sufficient, with fees covering the departments’ budgets. But fees were not increased from 2009 to 2012 to mitigate the impacts of the recession.

In 2012, the City Council approved a multiyear approach to reach 100 percent cost-recovery and has gradually increased the recovery rate each year since.

Padilla disagreed with the decision to continue pushing toward 100 percent cost recovery, and recommended the city fund between 25 percent and 30 percent of operating costs for such service agencies.

“The last thing you want to be doing is raising fees that are simply going to lower the level of service and operational capital that that department has to function under,” he said.

Revenues for regulatory service fees accounted for 75 percent of service costs in 2013 and rose to 83.3 percent in fiscal year 2015. The proposed fee increases for 2016 would increase the share of budgets covered by fees to 93.8 percent.

The city also is looking to reduce its expenses.

The city’s Engineering and Property Management Department, which handles plan reviews and inspections related to land development, could receive the biggest budget reduction: 9.2 percent, to $18.2 million from a little more than $20 million.

The City Manager’s Office’s budget could be reduced 5 percent, the second most of all departments.

Several other departments’ budgets could be increased in 2016, including innovation and technology, solid waste, transportation and police. City Manager Ron Carlee has recommended those departments’ budgets be increased by 7.9 percent, 7.6 percent, 2.3 percent and 2.1 percent, respectively.

Development fees

Of the Engineering and Property Management Department’s 18 user fees, 13 were proposed to be increased and three were proposed to be decreased. The increases range from as little as 0.2 percent to as much as 116.8 percent, and the biggest proposed decrease is 17.9 percent.

Carlee has proposed that major commercial subdivision review and inspection fees be increased in 2016 to $8,110 plus $100 per acre from $3,740 plus $100 per acre, which accounts for the biggest increase, 116.8 percent. Major residential subdivision review and inspection fees would be increased to $8,535 plus $100 per acre from $4,200 plus $100 per acre, or 103.2 percent.

Other significant increases include the commercial plan review and inspection fee and the commercial zoning plan review and inspection fee, which could increase 37.4 percent and 21.1 percent, respectively.

Rezoning fees also are slated for an increase. Conventional rezonings, which include single-family and multifamily rezoning requests, would be $1,950. Currently, conventional single-family rezoning fees are $925 and conventional multifamily rezoning fees are $1,350.

Also, all conditional rezoning fees have been restructured. Conditional rezoning fees now range from $1,250 and $3,100 and rezonings are classified as single-family, multifamily or ‘other.’ In 2016, all conditional rezonings will fall under either minor or major rezonings, which will cost $3,100 and $5,000, respectively.

Tax to replace solid waste fee

Carlee’s proposal to eliminate the $47 annual residential trash-disposal fee and instead raise property taxes by $1.35 cents per $100 valuation sparked a long conversation among council members at Wednesday’s meeting.

Grocery constructionThe property tax would essentially replace the $47 annual fee and cover the projected increase in 2016 for trash-disposal services, which Carlee said Wednesday would jump up to $65 for single-family homes if the council chooses to not opt for the property-tax increase.

“If we went the other route,” he said, referring to a fee increase, “It would be a much higher cost to homeowners.”

But if the council chooses to go the property tax route as proposed by Carlee, multifamily property owners would be stuck paying both the higher property tax as well as an existing $24 fee for each apartment unit because apartments are considered commercial properties.

“Our trash is not commercial; our trash is residential.” said Bryan Holladay, government affairs manager at the Greater Charlotte Apartment Association. “They throw away the same things that people in single-family (homes) are throwing away.”

But, as was the case in 2015, multifamily property owners will have the option to have their fees refunded by the city at the end of the fiscal year if they choose not to use the city’s service. Included in the 2016 budget is a $300,000 refund for multifamily property owners who chose not to use the service in 2015, and those property owners will receive refunds for the fees.

Both Padilla and Thomas acknowledged that the city is in a tight spot because of the budget deficit, and Thomas said the city’s decision to increase development fees does not mean higher fees aren’t appropriate.

“I think what we want – from the development side – is we want to be part of a culture of customer service and we want to be business friendl

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