City Trying To Reduce Developer Subsidies

In the last City Council Work Session on Wednesday, March 4, Community Development Director Mel Oberst presented several options to the City Council that are intended to reduce the subsidization of plan reviews, permits, and inspections by the General Fund. Mr. Oberst's intention is for the Building and Planning Divisions to become more self-funding instead of its historical reliance on millions dollars from the general fund to provide services to the development community. This subsidy rewards developers with lower fees while increasing the burden on the normal taxpayer.

According the the fee study by the FCS Group, current fees are far under actual costs in many areas. The Community Development Dept. will require a subsidy of almost $2.1 million from the general fund for Fiscal Year 2009. This will occur even though department staffing levels have been slashed in two rounds of layoffs, resulting in the anticipated FTE 89 jobs being reduced to 47 FTE's this summer.

Some actual examples from the study:

-Residential Subdivision-Base Fee:
Fee $4,156 Actual Cost $11,781 Subsidy $7,625

-Site Plan-New Development-Base Fee:
Fee $3,636 Actual Cost $9,207 Subsidy $5,571

-Site Plan-Major Alteration-Base Fee:
Fee $2,857 Actual Cost $7,720 Subsidy $4,863

-Tentative Subdivision Approval Modification-Base Fee:
Fee $1,650 Actual Cost$6,310 Subsidy $4,660

-Master Plan 21-40 Acres-Base Fee:
Fee $10,390 Actual Cost $27,616 Subsidy $17,226

-MR Zone Review Per Plan-Base Fee:
Fee $4,000 Actual Cost $26,859 Subsidy $22,859

-Refinement Plan/Dev Agreement per ORS 94-Base Fee:
$5,195 Actual Cost $36,532 Subsidy $31,337

Some fees actually are higher than their costs, although not by very much.

There are also costs for Long Range Planning, about $1.3M, and Fire Prevention Plan Reviews, about $54,000, that are both currently underwritten by general fund subsidies. A 14% LRP surcharge will recover about 50% of the LRP costs.

The intention of Director Oberst is to move towards a self-funding model and reduce reliance on general fund subsidies. He presented a spreadsheet showing several options, recommending the most aggressive option in Column G, along with a 14% surcharge to fund Long Term Planning. The subsidies expected to be needed even with fee and surcharge increases ranges from $1.2M to $874K, down substantially from the current $2.1M.

The department's operational reserve is currently under one month of funding, which is also a grave concern. The State of Oregon recommends a 6 to 18 month reserve. With another 14% surcharge it would take seven years to build up a 12 month reserve. However, this option was not part of Mr. Oberst's presentation.

With local builders association COBA already expressing concern, according to a KTVZ.com article, this will be a hot subject for the next City Council meeting. With the three new members all having received a high percentage of their campaign funding from COBA via the COAH PAC and the Realtor COAR PAC, many eyes will be watching to see if the Council decides it is time to make development come closer to paying for itself, or if the historical subsidy of development by the all Bend taxpayers will continue.