Developer fee refund doesn’t add up

At first glance, this seems reasonable. Would Wal-Mart rebate customers if it paid more than its share of sales tax to the city and the city agreed to kick that money back to the big-box mega-store? Probably not. Would Enloe Medical Center reimburse its patients if its accounting office discovered that the hospital had overpaid when refueling its helicopter at the Chico Municipal Airport? We seriously doubt it.

So why should the developers be any different here? Why should these five, who threatened to sue the city if it didn’t look into their concerns, be so conscious of their customers?

Well, for one thing, every time the suggestion of increasing development fees is broached by the City Council, builders, particularly those five, who all belong to the local chapter of the Building Industry Association, inevitably warn that development fees automatically get passed on to the home buyer. Such fees, combined with a lack of developable land, the developers say, are the engine that is driving the cost of homes beyond the average Chicoan’s means. But when the direction of the fees is reversed, it seems, they are suddenly removed from pricing calculations.

To avoid a lawsuit, the city entered into a tolling agreement with the five developers, meaning they would not file if the city agreed to do a study of the permit fee structure. The developers suspected it did not take the Planning Department as long to process building permits and do building inspections as the fees reflected. They were right, according to a study by the Maximus Company of Sacramento. The study also showed, however, that overall the Planning Department was undercharging customers by $427,753 per year.

But the only fees that could be tracked and precisely accounted for by the study were those charged to land developers, because those fees are based on real-time billing rather than such incidentals as the cost to keep the office lights on in the Planning Department.

In the long run the developers may be shooting themselves in the foot here. That’s because Planning Department employees are paid out of the funds raised by the fees they charge. The half-million dollars going back to the five developers comes from the department’s reserve. That reserve is used when business is slow, as often happens in a cyclical business like construction.

So, if the Planning Department is forced to lay off employees, that could well mean the permit process for developers will be significantly slowed. And in the building game, with interest rates, changing weather and idle workers, time is money.