The high cost of building: Who pays?

Does Bainbridge Island charge builders and developers for the actual cost of issuing permits?

If not, should it?

Mayor Darlene Kordonowy has appointed a seven-member citizen committee, as part of a three-pronged inquiry into those contentious issues.

The study has implications for the affordability of island housing, and on the city budget.

“Builders pay roughly 80 percent of the costs of issuing permits, but developers pay only about 20 percent,” said city finance director Ralph Eells. “There are questions about whether that is appropriate.”

For purposes of the discussion, officials have defined “builders” as those applying for building permits; “developers,” on the other hand, are those applying for short plats, subdivisions, conditional use permits, shoreline use permits, variances and the like.

Eells has calculated the total costs of the building and planning function at roughly $3.2 million, a number that includes salaries of those actually engaged in processing applications, a component of general city overhead and a share of the cost of operating city hall.

Building and planning costs together recoup about half that much.

The citizens committee represents a broad spectrum of island interests. Members are former city council member and retired realtor Liz Murray, mortgage broker Carolyn Frame, developer Dick Allen, Seattle architect and island resident Allen Ferrin, environmentalist and attorney Linda McMaken, environmentalist-writer Ian Bentryn and day-care operator Kim Burke-Weiner.

Sometime during the week of April 22, the consultant will brief the citizen committee and the council finance committee – Bill Knobloch, Deborah Vann and Norm Wooldridge.

The consultant report, legal opinion and committee recommendations will go to the city council’s land-use committee, and ultimately to the full council, which will decide whether to revise the current fee structure. The council’s goal is to take final action by July, in time to be incorporated into the budgeting process.

At Wednesday’s council meeting, Christine Nasser suggested that the scope of the committee’s work may be relatively narrow.

“The council discussed this extensively last year and was of the opinion that costs should be paid 90 percent by the developers and 10 percent by the general taxpayers,” she said. “The focus should be on how to get there, not on what the balance ought to be.”

At present, the city charges flat fees for items generally considered routine, and hourly fees for other work. Building-permit fees are based on the value of the project.

It is the hourly-rate charges – currently $90 per hour – that have generally drawn the most controversy.

“The word I hear on the street is that people don’t mind paying the fees, but they want to know that they are getting prompt service and correct answers, and they’re not sure that they are,” Murray said.

The $3.2 million spent on building and planning is the largest single item in the city’s $16 million operational budget, and shifting half of that cost from taxpayers to permit applicants could have an impact on property taxes.

The political potency of the issue became evident in last year’s city council race, when Deborah Vann unseated incumbent Jim Llewellyn in part by repeatedly calling for builders and developers to pay the entire permitting costs, reducing the tax burden on others.

But others, including local building interests and others, aren’t sure it’s so simple.

“I assume that developers pass the permit costs on to their buyers,” Murray said, “so when we add to those costs, we make housing less affordable.”

And Kordonowy said that not all fees are paid by people who can easily pass on their costs.

“What about the day-care operator who is applying for a permit?” she asked. “Should they be treated the same way as a subdivision developer?”

One prong of the inquiry has already begun – a consultant is reviewing Eells’ assertions from a technical accounting perspective, and looking at what other Washington municipalities charge.

The citizens’ committee will consider policy issues involving an appropriate division of costs between the general taxpayers and the applicants.

At some point, a legal opinion will be sought on what charges can legally be included in the base against which fee-recovery is measured.

“This came out of discussions last year, once we installed software that would let us identify how hours are being spent,” Kordonowy said.

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