HomeMy WebLinkAbout06.a.2) Final draft report on Bartle Wells Associates' audit of permit counter and connection fee collection practices(a. Q.2
CENTRAL CONTRA
COSTA SANITARY
DISTRICT
AUDIT OF PERMIT COUNTER
AND CONNECTION FEE
COLLECTION PRACTICES
March 9, 2012
FINAL DRAFT
BARTLE WELLS ASSOCIATES
Independent Public Finance Advisors
1889 Alcatraz Avenue
Berkeley, CA 94703 -2714
Tel. 510.653.3399
Fax 510.653.3769
www.bartlewells.com
TABLE OF CONTENTS
EXECUTIVESUMMARY ................................................................ ..............................1
INTRODUCTION........................................................................... ............................... S
Purposeof the Capacity Fee ...................................................................... ............................... 9
Definition.................................................................................................... .............................10
CURRENT OPERATING PROCEDURE .......................................... .............................11
GeneralOperating Procedure .................................................................. .............................11
InformationAvailability ............................................................................ .............................11
PaymentResearch ...................................................................................... .............................11
FeeCollection ............................................................................................. .............................12
CURRENT ISSUES WITH OPERATING PROCEDURE .................... .............................12
In- District Permit Issuing Agencies ......................................................... .............................12
HistoricalPayment Research .................................................................... .............................12
SpecialStudies ............................................................................................ .............................13
Expired& Abandoned Permits ................................................................ .............................13
FeeCollection ............................................................................................. .............................13
Residential 2nd Living Units .................................................................... ............................... 14
Restaurants& Delicatessens ..................................................................... .............................14
SwimmingPools ......................................................................................... .............................14
INDUSTRY PRACTICES AND PROCEDURES ................................. .............................15
PermitsIssuing Agencies: ....................................................................................................... 15
HistoricalPayment Research: ............................................................................................... 15
SpecialStudies ............................................................................................ .............................16
Trackingof Fees: ..................................................................................................................... 16
Expirationof Permits: ............................................................................................................ 16
Follow -Up on Permits: ............................................................................................................ 16
FeeCollection: ......................................................................................................................... 17
Residential2nd Living Units ...................................................................... .............................17
Restaurants& Delicatessens ..................................................................... .............................17
SwimmingPools ......................................................................................... .............................17
ShoppingCenters ....................................................................................... .............................17
CONCLUSION.............................................................................. .............................19
EXECUTIVE SUMMARY
The Central Contra Costa Sanitary District ( "CCCSD" or "District ") is a special district,
established in 1946, that collects and treats an average of 45 million gallons of wastewater per
day for approximately 462,000 residents and businesses in central Contra Costa County (the
"County "). The District provides service through 1,500 miles of sewer lines and 18 pumping
stations. The District's 146 square mile service area is diverse and includes the cities of
Concord, Walnut Creek, Danville, Lafayette, Moraga, and Orinda and County unincorporated
areas. The District maintains and operates its own centralized treatment facility in Martinez,
which also produces about 90% of the plant's daily power needs. The District's mission is to
protect public health and the environment by collecting and treating wastewater, recycling high
quality water and promoting pollution prevention.
The District operates a permit counter, and is responsible for issuing sewer permits, determining
and collecting sewer connection fees for construction within its service area, and for inspecting
the sewer connection work performed by contractors. Fees are collected for building projects
that will either require a new connection to the collection system, or increase sewer usage from
an existing connection.
The District uses the SunGardTM building permit software to process thousands of initial quotes,
inquiries and permit issuances each year. The software was implemented in 1994 and the
District is still using an old "green screen" version which is difficult to use. At least 13 permit
staff employees have worked with the software over the last decade and training with the
software has been primarily on-the-job rather than formal instruction provided by SunGardTM
Working the permit counter is a high stress job since staff must be ready to respond to the public
at the counter or on the phone at a moment's notice. The combination of a high volume of
requests, limited SunGardTM training and antiquated software has led to inconsistent practices.
In November 2011, the District's software vendor ran a report with the SunGardTM management
software which showed the existence of a significant number of entered, but uncollected permit -
related fees in the system. A District employee made a presentation to the Board of Directors
recommending a special audit be performed to investigate the SunGardTM findings, follow -up
procedures for outstanding permits, rate exemptions for swim clubs and several other issues.
The District engaged Bartle Wells Associates (BWA) to conduct an audit of its permit counter
practices. The purpose of this audit is to evaluate the District's current permit counter operating
and connection fee collection procedures. This report summarizes the findings and
recommendations of the audit, and includes an evaluation of the District's current operating
practices as well as a survey of practices of other, similar, local wastewater agencies for
comparison.
Bartle Wells Associates 1 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
BWA interviewed staff at eight local agencies similar to the District regarding policies and
practices of collecting capacity fees associated with the issuances of construction permits. These
agencies were chosen for the survey based upon their proximity to the District and that each
provides similar wastewater services. The survey focused on the issues addressed in the audit to
learn policy and management approaches used by these agencies that may be helpful to the
District.
The following table summarizes the results of the survey.
Industry Practices Survey Summary
Collects
Follows
Swimming
Swimming
Years
Researches Charge
Up on
Separates Pool
Pool
Permit
Charge Manages Before
Expired
Restaurants Connection
Sewer
Is
History Database Permit
Permits
P. Delis Fee
Champs **
Artivp
CCCSD
✓
✓
✓
0.5
DDSC
✓
✓
✓
1
DSRSD
✓
✓
✓
✓
✓
✓
3
EBMUD
✓
✓
✓
--
FSSD*
✓
✓
✓
--
MVSD
✓
✓
✓
1
NSD
✓
✓
✓
1
USD
✓
✓
I
I ✓
✓
0.5
VSFCD
✓
✓
I ✓
I ✓
✓
--
* FSSD contracts with cities for the research, collection and management of connection fees
** Sewer charges for swimming pools are based upon metered water use
Key Audit Findings and Recommendations
Identifv and Resolve the Accumulated Entered but Uncollected Permit- Related Fees which
show -up on the SunGardTM Software System
In November 2011, the District's software vendor ran a report with the SunGardTM management
software which showed that there were potentially a large number of entered, but uncollected
permit- related fees in the system. Such fees include capacity fees, application fees, inspection
fees, plan review fees, annexation charges, and reimbursement fees.
With the assistance of the software vendor, District staff reran this report and determined that the
SunGardTM system showed a total of $20.5 million in accumulated entered, but uncollected fees
dating back to 1993, when the software was first implemented. Further analysis by the staff is
currently in process with preliminary results showing the majority of the $20.5 million is a result
Bartle Wells Associates 2 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
of items that were canceled, closed quotes, permit applications or clerical errors which should
not be included in a report of outstanding fees. To date, the analysis by staff has reviewed all
166 items in the system with a value of over $10,000 and identified 1,522 items with a value of
under $10,000 that still need to be analyzed. As of the writing of this report, the amount of the
permit- related fees that still need to be resolved is $6,558,665. All of these items need to be
reviewed as soon as possible to determine if they are collectable and if so, efforts should be made
to collect them. The District should establish criteria for determining which transactions should
be pursued and how to provide an appropriate audit trail for the investigation. District Counsel
should be asked to advise regarding applicable statutes of limitation for collection of fees and
other related matters.
Recommendation — Identify and resolve all outstanding permit- related fee issues in the
SunGardTM system. Consider retaining an outside specialist familiar with the SunGardTM system
to assist staff in completing this task in an expeditious manner. Form a team of District and
temporary employees to go through the report line -by -line using Geographical Information
system (GIS), hard copy records, and field inspections to do verifications. Work with District
Counsel to review and update District policies and procedures for collecting outstanding fees.
Regular Follow upon Outstanding CCCSD Permits is Needed
Going forward, procedures for routine follow up for "aged" permit applications and periodic
follow up on outstanding fees should be implemented by the District. It has been staff's
experience that it is far easier to resolve items sooner, when they are "fresh ", rather than later. A
report summarizing the status of outstanding applications, permits, and fees should be prepared
and presented to the Finance Committee and /or Board of Directors on a regular (at least annual)
basis.
Recommendation — Implement procedures for routine follow up on aged permits and periodic
follow up on new permit applications. Submit regular (at least annual) status reports on
outstanding applications, permits, and fees to the Finance Committee and /or Board of Directors.
Timing of Ca-pacily Fee Payment
CCCSD currently collects its capacity fees on new connections after building permit "Roof and
Rough Plumbing" inspections have been completed (called for when the roof is on the new
building and the plumbing is done). The District originally adopted this approach to be customer
friendly by deferring collection of fees to the time of actual physical connection. However, due
to various circumstances, some builders never return to the District for their "Roof and Rough
Plumbing" inspections and so capacity fees are not collected. In the case of tenant improvements
permits, the District collects its capacity fees at the time of plan review. Based on BWA's
survey of eight surrounding wastewater agencies, most collect the fees at the time of plan review
and report that they encounter few payment problems. The District should consider collecting all
capacity fees (for new and tenant improvement projects) at the time of plan review.
Bartle Wells Associates 3 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
Recommendation — Consider collecting all capacity fees at the time of plan review instead of
after "Roof and Rough Plumbing" inspection.
Agreements are needed with the County and Cities within CCCSD to Require CCCSD Sign -off
Before Issuance of Certificates of Occupancy/Final Permits for New Construction
As described above, some wastewater permit applications never get finalized, final inspections
are not called for, and capacity fees are not collected. A key reason is that there are no
agreements with the individual agencies within the District that specify that permit counters must
require CCCSD sign -off before a final building permit inspection or issuance of a certificate of
occupancy (CO). All of the wastewater agencies surveyed have sign -off agreements with the
cities in their service areas before either the building permit or the CO is issued to ensure fee
collection. However, District staff report that the County and city building departments have
been resistant to this type of agreement when approached in the past.
Recommendation — Secure agreements with the County's and cities' building departments within
the District to require District inspectors to sign -off before final building permit inspection and
issuance of a CO.
Review and Standardization of Permit Counter /Capacity Fee Procedures is Needed
A recurring theme during the audit was the need for a comprehensive set of standard operating
procedures and definitions for use by permit counter staff. This will help ensure consistency in
permit quotes from one staff member to another and allow new staff members to get up to speed
more quickly.
Special Studies: The standard procedures should clarify when a "special study" is needed and
how it should be conducted. Currently, there is no standard procedure for special studies and this
yields inconsistencies between the capacity fees quoted at the permit counter and the fees
determined through the study. A special study can be requested by any applicant for any
capacity fee. Permit counter staff reports that some builders always ask for a "special study"
because the District will allow them to be issued on any project and usually results in lower fees.
To ensure fairness, the District needs to be diligent in doing the required one to five year review
of measured consumption from recipients of special studies.
Historical Parcel Capacity Fee Research: When a parcel is redeveloped, the District, like most
wastewater agencies, credits owners for prior capacity fees paid on the parcel. When an
applicant believes that there was a prior use on their parcel, the District does research to
determine if and what type of development was there and what Capacity Fee credit goes with the
parcel. Standard procedures should be developed to guide and expedite historical research by
permit counter staff. Existing historical resources should be digitized and cataloged for easy
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March 9, 2012 Permit and Connection Fee Audit
reference. If information on a parcel is not found in the digitized records, the burden to research
and prove prior use would be on the applicant.
Mixed Use Parcels (e.g., shopping centers): These present some of the most difficult and time
consuming fee calculations the permit counter handles. Current procedures used in calculating
fees for mixed -use parcels should be reviewed and new standard procedures developed as part of
a comprehensive fee study.
Restaurants vs. Delicatessens: Capacity fees and sewer service charges for delicatessens are
significantly lower than fees for restaurants. Many of the requests for special studies involve
food service establishments. The District's metric for differentiating between a delicatessen and
a restaurant should be reviewed as part of a comprehensive fee study. The concept of "leasing"
capacity (that is, creating an option of paying an ongoing charge for use of system capacity
instead of an upfront capacity fee) should also be explored as this may be helpful in reducing the
upfront impacts of capacity fees on new food service establishments trying to open their doors
for the first time.
Second Living Units: Some applicants may omit fixtures or appliances from submitted plans, or
install fixtures and appliances after "Roof and Rough Plumbing" inspections to avoid paying
capacity fees and sewer service charges for a second living unit. This was a universal problem
reported by all eight of the wastewater agencies that we surveyed. Perhaps a follow up review of
suspect parcels about a year after the permit is pulled would reveal evidence of a second unit
(e.g., a second mailing address on the parcel or multiple electric meters).
Cap and Reconnect Permits: When a connected building is to be demolished and replaced, the
District requires that the property be temporarily disconnected to prevent demolition debris from
entering the public sewer system. Payment of a fee and issuance of a District "cap & reconnect
(C &R)" permit is required prior to any demolition work. After the replacement building passes
its "Roof and Rough Plumbing" inspections, reconnection of the property is permitted. Building
departments often do not require a District "cap & reconnect (C &R)" permit before issuing a
demo permit so the District's C &R Permit fee is not collected. The District should include
provisions in the agreements with demolition permit issuing agencies requiring that all applicants
complete the "cap" portion of the District C &R permit prior to commencing demolition work.
Capacity Use Charge Program: The District's capacity use charge program provides a capacity
fee installment payment option to users whose capacity fee rates are higher than the Delicatessen
rate. Under the program the customer pays an initial fee equal to the delicatessen rate, and then
makes annual payments based on metered water consumption (See CCCSD Code Section
6.12.050 H).
Bartle Wells Associates 5 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
Fee Deferral & Installment Payment Plans: In response to building industry requests, the District
currently offers subdivision developers the option to defer payment of capacity fees and
annexation charges until close -of- escrow, or first occupancy. The developers sign a promissory
note and recorded memorandum of agreement and pay setup and participation charges to cover
direct and administrative cost for each property enrolled in the program.
To encourage properties on septic tank systems to convert to public sewer service, the District
offers property owners the option of installment payment of capacity fees over 10 years at the
interest rate listed in the schedule of rates and charges. Property owners sign a promissory note
and a recorded memorandum of agreement and pay a setup charge to cover administrative cost
for each property enrolled in the program.
These programs are currently administered by only one staff member, so training of others would
provide needed backup.
Recommendation — Develop a comprehensive standard manual of procedures and definitions for
the permit counter staff to use.
Staff Needs Additional Training on SunGardTM Software
As highlighted by the lack of awareness of permit counter staff of the capabilities of SunGardTM
to generate the report on outstanding permits, staff needs to be trained on how to use this tool
more effectively. In its December 23, 2011 report to the District, SunGardTM found that the
District is not utilizing the software to its full potential and could be saving time and improving
customer service levels with additional training. The District is still using an old "green screen"
version of the software and should consider updating to a more user - friendly, Windows -like
version. Inspectors, who currently do not use the system at all, could be trained to use the
system in the field on portable devices, thereby saving time and potentially improving data
accuracy.
Recommendation — Provide staff with additional training on the SunGardTM System as
appropriate. Request a proposal from SunGardTM to provide training to staff to allow further
utilization of the software. Consider upgrading to a more user friendly version of the software if
the cost is reasonable and funds are available.
Eliminate Current Exemption for Swim Clubs
Longstanding District practice (ref. 1977 Board Resolution Number 77 -1) has been to exempt
swimming pools from paying wastewater charges. The logic, as stated in the 1977 resolution,
was that the costs "shall be considered as included in the residential environmental quality (now
Sewer Service) charge rates and no separate charge will be made therefore." In general, it's
difficult to determine actual wastewater flows from swimming pools as they draw significant
Bartle Wells Associates 6 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
amounts of water from the municipal water system but most of the water is lost to evaporation.
Typically, the pools themselves are not physically connected to the sewer system.
A number of District swim clubs do have facilities that contribute to the sewer flows, including
food prep areas, toilets and shower facilities that are not paying sewer service charges for their
use. Under Prop 218, (passed by the voters in 1996) rates for all wastewater customers must be
proportional to their usage of the system. Since many swim clubs do in fact discharge to the
District's sewer system, they should be charged accordingly. Staff has compiled a partial list of
over 70 swim clubs /community pools, country clubs, swim schools and pools at exercise /athletic
clubs within the District. Of these, 46 are not currently paying sewer service charges.
Recommendation — eliminate current exemption for swimming pools /clubs that are connected to
the sewer system and develop an appropriate methodology for calculating sewer service charges
for these users.
A Comprehensive Fee Study is Needed
The last time the District did a comprehensive fee study was in 1997. This audit has brought to
light many issues with the current rate structure including:
• Residential rates — should multi - family, planned retirement and second residential units
pay less than single - family?
• Rates for restaurants vs. delicatessens — are restaurant and delicatessen rates too high or
too low?
• Should food service establishments (e.g., restaurants, delicatessens and bakeries) be
offered the option of "leasing" capacity?
• Rates for mixed use parcels should be reviewed
• Rates for swim clubs need to be developed
• Are there too many rate categories in the existing rate structure?
• Application fees could be simplified. Consider having only two application fees; one for
residential and one for commercial.
• Inspection fees for private lateral repairs - should they be reduced to encourage customers
to do retrofits? (application and inspection fees for "clean -out" only permits are already
deeply discounted)
Recommendation — Commission a comprehensive fee study.
Other Issues:
• Determining which reimbursement fees apply to a particular parcel is sometimes difficult
and only a few staff members are fully trained to deal with special cases. Can a reference
by parcel be added to the SunGard database for instant access by Permit Counter staff?
Bartle Wells Associates 7 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
• District rates and fees should be available online in a clear and accessible format.
Consider an online rate calculator like EBMUD's.
INTRODUCTION
The Central Contra Costa Sanitary District (the "District" or "CCCSD ") is a special district that
collects and treats an average of 45 million gallons of wastewater per day for the residents and
businesses in central Contra Costa County (the "County "). The District was established in 1946
and provides service to approximately 146 square miles through 1,500 miles of sewer lines and
18 pumping stations. The District maintains and operates its own treatment facility, which also
produces about 90% of the plant's daily power needs. The District's mission is to protect public
health and the environment by collecting and treating wastewater, recycling high quality water
and promoting pollution prevention.
In November 2011, the District's software vendor ran a report with the SunGardTM management
software. This report showed there were potentially a large number of entered, but uncollected
fees in the system. In January 2012, the staff ran this report again showing a total of $20.5
million in accumulated entered, but uncollected, fees dating back to 1993, when the software was
first implemented. To date, the analysis by staff has reviewed all 166 items in the system with a
value of over $1,000 and identified 1,522 items with a value of under $1,000 that still need to be
analyzed. The amount of the permit- related fees that still need to be resolved, including
potentially collectable items is currently $6,558,665. All of these items need to be reviewed as
soon as possible to determine if they are collectable and if so, efforts should be made to collect
them.
The District engaged Bartle Wells Associates (BWA) to conduct an audit of their permit counter
practices. The purpose of this audit is to evaluate the District's current permit counter operating
and connection fee collection procedures. As such, this audit evaluates the District's current
practices to identify procedural weak points, compare with industry standards and make
appropriate recommendations based on the findings.
The District defines a connection fee as the sum of applicable capacity fees, application fee,
inspection fee, plan review fee, annexation charge, reimbursement fees and the first year's sewer
service charge. The current connection fee is approximately $6,500 for a basic residential
Bartle Wells Associates 8 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
connection in the gravity service zone with the majority of the cost attributable to the capacity
charge, which starts at $5,465.
The following table presents the connection fee for a single family residential unit in the gravity
service area.
CCCSD Residential Connection Fee Components (FY 2011 -12)
Charge
Capacity Charge
$5,465
Application Fee
$132
Annexation Charge
$400
Inspection Fee
$152
Reimbursement Fee*
-
Plan Review Fee **
-
Sewer Service Charge
341
Total
$6,490
* Reimbursement fees are dependent upon the location of the parcel and do not apply to all parcels
** Plan review fees are primarily for properties with pumping systems or non - residential
applications
Commercial fees may have additional charges
Purpose of the Capacity Fee
The purpose of the capacity fee is for new customers to buy -in to the assets of the District so as
to equalize the investment in District assets between current and new customers. New
wastewater connection fees are collected from new construction and from tenant improvements
on parcels with existing connections.
The District's 2010 Collection System Master Plan indicates there is sufficient conveyance
capacity to connect new customers'. Notwithstanding the available capacity for new customers
and connections, future wastewater system capital improvement projects will be needed to serve
the current and new connections. The capacity fee is directly related to the recovery of costs of
existing facilities and new facilities to serve future new customers.
12010 Collection System Mater Plan Update, p 4 -3.
Bartle Wells Associates 9 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
Definition
The capacity fee is a one -time fee charged to an applicant requesting a new or expanded service
connection. The charge is established pursuant to the Mitigation Fee Act (California
Government Code 66000 et al). Section 66013(a) specifically addresses water and sewer
connections as follows:
Notwithstanding any other provision of law, when a local agency imposes fees for
water connections or sewer connections, or imposes capacity charges, those fees
or charges shall not exceed the estimated reasonable cost of providing the services
for which the fee or charge is imposed, unless a question regarding the amount of
the fee or charge imposed in excess of the estimated reasonable cost of providing
the services or materials is submitted to, and approved by, a popular vote of two -
thirds of those electors voting on the issue.
The capacity fee is not considered a tax or special assessment. It is not subject to Proposition
218, which added Articles XIIIC and XIIID to the California Constitution. The fee is for
facilities that benefit the person or property being charged and making the service connection.
2 Capacity and connection fees are used interchangeably, but there is a subtle distinction as identified in Government
Code Section 66013. "A capacity charge means a charge for facilities in existence at the time a charge is imposed or
charges for new facilities to be constructed in the future that are of benefit to the person or property being charged."
[Govt. Code Sec. 66013(b)(3)] "A [connection] fee means a fee for the physical facilities necessary to make a water
or sewer connection, including, but not limited to, meters, meter boxes, and pipelines from the structure or project to
a water distribution line or sewer main, and that does not exceed the estimated reasonable cost of labor and materials
for installation of those facilities." [Govt. Code Sec. 66013(b)(5)] BWA uses the District's definition of "capacity
charge" to include the sum of the above defined capacity charge and connection fee and all other associated
administrative fees.
Bartle Wells Associates 10 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
CURRENT OPERATING PROCEDURE
The District is responsible for collecting sewer connection fees for building and tenant
improvement permits issued by the County and Cities in its service area. The District is also
responsible for inspecting the sewer connection work performed by contractors. Fees are
collected for any permit issued that will either create a new connection to the collection system,
or increase sewer usage from an existing connection. Such examples of increased usage are the
addition of an extra living unit on a residential property, or a retail store being converted to a
restaurant on a commercial property. Fees are not collected (or refunded) if a parcel decreases
sewer usage or disconnects from the collection system.
General Operating Procedure
The District operates a permit counter, which collects and accounts for connection fees for issued
permits. When a developer, contractor or other such responsible party applies for a construction
permit in the District's service area, the permit issuing agency is responsible for informing the
applicant of the requirement of contacting the District for approval for any new or modified
sewer services which may come as a result of any development on their property. The applicant
must then submit improvement plans to the District for review. The District then informs the
applicant that the District will inspect the connection and of any connection fees to be paid by
the applicant prior to any sewer work being performed on the property. When the applicant
brings their plans to the District permit counter, the District takes an application for service from
the applicant and affixes a stamp or sticker to the plans as evidence to the issuing agency
showing compliance with District ordinances and regulations. At which time, the issuing agency
may complete its plan review and issue a building permit for the improvement. For new
construction, CCCSD inspections are done once the roof is on and rough plumbing is installed
and prior to any work on the side sewer. Unfortunately, applicants sometimes misinterpret the
preliminary stamps that CCCSD applies to the plans as CCCSD's final approval and do not
return to pay connection fees and obtain a sewer permit.
Information Availability
Connection fee information is available at the District offices and online, at the District website.
To find information online, the applicant can go to the District website and select the "Permits"
link on the left column of the District's homepage. This takes the applicant to the "Permit
Counter" webpage where there are several links to help guide the user to the right permits, info
sheets and downloadable applications.
Payment Research
The District maintains an electronic database that tracks the history of all payments made on any
parcel that has been issued a permit since 1994. For parcels that were connected prior to that
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March 9, 2012 Permit and Connection Fee Audit
date, the permit counter staff uses various other records and sources to establish if any
connection fees are due. The District has electronic -image records for many parcels dating back
to its inception in 1946, but will also use other historical records, such as paper receipts, aerial
photos, old phone books, insurance maps and historical society documents to establish a
traceable history of usage. Once a traceable history for a parcel is established, a connection fee
is determined and applied to the new permit.
Fee Collection
Fees for new construction are collected after building permit "Roof and Rough Plumbing"
inspections have been completed, and are expected to be collected prior to "final" building
permit inspection and issuance of a CO. Fees for tenant improvements are collected at the time
of the District's plan review.
CURRENT ISSUES WITH OPERATING PROCEDURE
The previous section outlines the overall approach the District follows to account for connection
fees; however there are many fee collection and tracking issues that arise throughout this process
that are problematic. This section addresses each of these issues. The issues discussed were
derived from interviews with permit staff, informational interviews with neighboring districts
and policy review of operating procedures.
In- District Permit Issuing Agencies
When an applicant applies for a building permit with an issuing agency (city or County) within
the CCCSD service area, there is no guarantee the issuing agency will inform the applicant of
any District requirements. Individual permit issuing agencies may not require District inspection
and sign -off before final building permit inspection or granting of a CO. An applicant may go
through the entire permit and construction process with the issuing agency and not realize there
are any District sewer requirements until the time of applying for a CO, if ever. There are
currently no statutory requirements, agreements or mandated procedures, for building permit
agencies within CCCSD's service area which would ensure the District's permit and inspection
requirements are met and any fees are collected.
Historical Payment Research
When researching prior connection fee payments made on a particular parcel, the District's
electronic database only retains information for payments made after the system was installed in
1994. According to staff, the SungardTM software could be configured to retain manually entered
pre -1994 parcel information.
Bartle Wells Associates 12 Central Contra Costa Sanitary District
March 9, 2012 Permit and Connection Fee Audit
Currently, any payment made prior to 1994 requires independent research for each parcel. While
the District maintains records for most parcels dating back to 1946, some parcels require more
research to obtain a traceable occupancy history. For these parcels, the District staff will use
paper receipts, aerial photographs, old phone books, newspapers, insurance maps and historical
society documents in an effort to document occupancy history. When a traceable history is
established through this method, the District assumes previous connection fees were paid and the
parcel is credited for this payment.
Special Studies
The District allows applicants to request a special study to calculate the capacity charges due for
a particular parcel and use. The special study often yields lower capacity fees than standard
rates. This creates an inconsistency in determining charges. Permit counter staff reports that
those who request a special study usually end up with a lower capacity fee. A special study can
be requested by any applicant for any capacity fee. Some staff also believes that once a
contractor or developer is aware that special studies can lead to reduced charges, they request
special studies for all of their projects. It should be noted that permit counter staff may be
unaware of cases where preliminary work on a special study indicates a higher fee, in which case
the applicant opts for a standard rate. Also, completed special studies are to be tracked for five
years to determine whether additional fees should be collected or a refund made.
Expired & Abandoned Permits
The District allows each applicant six months to complete a new connection or finish with tenant
improvements before the permit expires. Once a permit expires, the applicant can apply to
extend the permit at no extra cost for an additional six months. This can be done twice for each
permit, for a total of 18 months to allow for project completion and inspection. Should an
applicant not renew the permit, and it expires prior to District inspection, the permit is
considered to be void and it is assumed there is no further development activity at the
construction site; however this may not be the case. Construction can continue at a site with an
expired permit and application made for occupancy with the issuing agency without contacting
the District for inspection or follow -up.
The District currently doesn't have adequate follow -up procedures or inspection processes for
expired permits. Because there is limited follow -up, the development may still connect, or
change sewer use, without the District's knowledge.
Fee Collection
Any fees for new connections are collected after building department "Roof and Rough
Plumbing" inspections have been completed. There is no safe -guard in place to ensure the
applicant returns to the District to pay fees due and obtain a District permit. The in- District
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March 9, 2012 Permit and Connection Fee Audit
building permit issuing agencies do not require District approval before conducting their final
building permit inspection or issuing a CO.
For tenant improvements on property already connected to the District's sewer system,
connection fees are collected at the time of District plan review.
Residential 2 "d Living Units
The addition of a second living unit on a residential property requires the applicant to apply for a
building permit. The applicant may go through the process and notify the District of their
intention to construct a second living unit on their property. In some cases, the applicant will
inform the District of all fixtures and appliances to be installed, resulting in collection of second
living unit fees; in other cases this information may be omitted, or additional fixtures or
appliances may be added after final building department inspection to avoid paying additional
District charges.
Restaurants & Delicatessens
The District makes a distinction between food service establishments. They are either classified
as a restaurant or as a delicatessen based upon whether the establishment will have a type 1 vent
hood over their cooking range /oven. The connection fee and sewer service charge rates for the
two classifications are significantly different. This is an area of particular contention with new
construction and should be reviewed as part of a comprehensive fee study. The concept of
"leasing" capacity (that is, creating an option of paying an ongoing charge for use of system
capacity instead of an upfront capacity fee) should be explored as this may be helpful in reducing
the upfront impacts of capacity fees on new businesses trying to open their doors.
Swimming Pools
The District does not currently charge sewer service charges for swimming pools. However, a
number of District swim clubs do have facilities that contribute to the sewer flows, including
food prep areas, toilets and shower facilities that are not being charged for their use. Under Prop
218, (passed by the voters in 1996) rates for all wastewater customers must be proportional to
their usage of the system. Since many swim clubs do in fact discharge to the District's sewer
system, they should be charged accordingly. Staff has compiled a list of over 70 swim
clubs /community pools, country clubs, swim schools and pools at exercise /athletic clubs within
the District. Of these, 46 are not currently paying sewer service charges.
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March 9, 2012 Permit and Connection Fee Audit
INDUSTRY PRACTICES AND PROCEDURES
BWA interviewed staff at eight local agencies similar to the District regarding policies and
practices of collecting capacity fees associated with the issuances of construction permits. The
agencies surveyed are shown in the table below.
Local Wastewater Agencies Surveyed
District Name
Acronym
Primary Cities Served
Delta Diablo Sanitation District
DDSD
Pittsburg /Antioch /Bay Point
Dublin San Ramon Services District
DSRSD
Dublin /San Ramon
East Bay Municipal Utilities District
EBMUD
Oakland /Berkeley /Alameda
Fairfield Suisun Sewer District
FSSD
Fairfield /Suisun
Mt. View Sanitary District
MVSD
Martinez
Napa Sanitation District
NSD
Napa
Union Sanitary District
USD
Fremont/Union City /Newark
Vallejo Sanitation & Flood Control District
VSFCD
Vallejo
These agencies were chosen for the survey based upon their proximity to the District and that
each provides similar wastewater services. The survey focused on the issues addressed in the
previous section to learn policy and management approaches that may be better than the
District's current practices.
Permits Issuing Agencies:
All of the agencies interviewed except CCCSD have cooperative arrangements with the city
permit issuing agencies within their service areas to ensure sewer capacity fee collection. As
such, the cities will not issue a CO unless the applicants have complied with each district's
requirements. Sewer agencies including CCCSD, MVSD, and DSRSD that serve areas in
unincorporated Contra Costa County do not have any guarantees from the County that their
sewer fees will be verified before the County permitting department gives final permit approval
or issues a CO. The County expects applicants to complete all necessary filings with each
agency listed above, but does not enforce compliance through the permitting process.
Historical Payment Research:
All of the agencies interviewed have a system to research the history of capacity fees levied on
parcels in their service area. Each agency has a limit as to how far back they will research.
While most agencies perform research as far back as records will allow and use a variety of
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March 9, 2012 Permit and Connection Fee Audit
sources, some set limits. For those agencies that set research limits, should an applicant contest
the findings the burden of proof will then shift to the applicant to provide a record of historical
occupancy to justify their claim. All agencies will accept applicant provided records regardless
of onus.
Special Studies
All of the agencies interviewed have procedures to conduct a special study, if needed. However,
all have indicated that these studies are only conducted if the applicant's proposed land usage is
not already represented as a defined customer class, or if the applicant can provide sufficient
reason to contest the agencies' strength factor and flow metrics. This process is usually reserved
for specialized industries, multi -use parcels and franchises that have verifiable data. CCCSD
will conduct a special study for any applicant who asks. All agencies charge administrative and
cost -of -study fees for each special study.
Tracking of Fees:
All of the agencies interviewed employ a tracking system of all capacity and connection fees
charged for each parcel. Each agency uses different types of records, and most use a
combination of electronic database, ledgers, microfiche and other records. A few have moved to
completely computerized systems, but will still store hard files as back up.
Expiration of Permits:
A few agencies do not set a time limit for their permits to expire. These agencies allow their
permits to be active indefinitely until either a connection is made and inspected, or a new permit
is issued to a new applicant for that particular parcel. Unlike the District, these agencies do not
inspect any work related to the collection system. Most agencies have either a six -month or one-
year limit on their permits with an option to extend the permit twice.
Follow -Up on Permits:
For the agencies that allow permits to expire, many follow up on expired permits. DSRSD
updates permit statuses monthly and will issue a notification to the applicant 90 days prior to
permit expiration. USD updates permit statuses quarterly and will contact any delinquent
applicants. Smaller districts will occasionally monitor the parcel site for any construction
activity. All other agencies wait until the next project applies for a permit and then applies any
credit, if applicable. However VSFCD will contact applicants after one year if they have not yet
attained a CO. VSFCD does this because they adjust their connection and capacity charges
annually to a construction cost index, and those with open permits must pay the difference in
cost from the adjustment.
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March 9, 2012 Permit and Connection Fee Audit
Fee Collection:
Most agencies interviewed collect all charges before the issuance of a building permit by the
County or City, usually at the plan review level. By doing this, these agencies have eliminated
any problems with collecting from incomplete projects. All other agencies interviewed collect
connection charges prior to the issuing of the CO for new connections. It should be noted that
these agencies also have sign -off agreements with the cities that issue the CO, whereas CCCSD
does not. Only EBMUD gives developers either one year to pay or bills the customer directly on
monthly service bill over one year in equal increments for tenant improvements.
Residential 2 "d Living Units
All of the agencies interviewed consider a 2nd residential living unit to contain the minimum
amount of fixtures required to sustain a single family as a stand -alone unit, such as a bathroom
and a kitchen. All agencies have an issue with applicants occasionally not disclosing the
complete details of fixture installations, but only the very small districts seem to effectively
perform a follow -up procedure to verify. Because intent to defraud can be difficult to prove,
most agencies will accept the applicant at their word based on submitted plans. All agencies will
follow -up and investigate if any unreported usage is discovered through unrelated inspections.
Some agencies receive postal address lists that can be used to identify any illegal 2nd living units,
but none actively employ a formal program to discover violators.
Restaurants & Delicatessens
Most of the agencies interviewed do not discern between a restaurant and a deli. These agencies
treat all food service businesses as having equivalent impact upon the system. The few that do
make a distinction use a variety of metrics such as square footage, whether customer dishes are
washed on site or quantity of food prepared. These are typically smaller agencies that conduct
personal interviews with each food service business to determine their impact.
Swimming Pools
None of the agencies interviewed collect connection fees for swimming pools. In all districts
residential pools are not permitted to connect to the collection system and all pools are required
to apply for a drainage permit, should they require draining.
Most agencies do not charge sewer service charges for swimming pools specifically, but will
charge for any showers, toilets and sinks on the parcel premises. For those agencies that do
charge sewer service charges for swimming pools, charges are based upon water usage.
Shopping Centers
Among the agencies interviewed, approaches to shopping centers varied widely. For new
shopping center connections some agencies will collect retail connection fees for each store front
while some will wait until a business moves into an available unit. Of those who use a flat rate,
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March 9, 2012 Permit and Connection Fee Audit
usually adjustments will be made if a non - retail business occupies an available unit. For tenant
improvements to existing connections, all agencies will base the connection fee upon the type of
occupying business.
The following table summarizes the results from the above discussion.
Industry Practices Survey Summary
Collects
Follows
Swimming
Swimming
Years
Researches Charge
Up on
Separates Pool
Pool
Permit
Charge Manages Before
Expired
Restaurants Connection
Sewer
Is
History Database Permit
Permits
& Delis Fee
Charges**
Active
CCCSD
✓
✓
✓
0.5
DDSC
✓
✓
✓
1
DSRSD
✓
✓
✓
✓
✓
✓
3
EBMUD
✓
✓
✓
--
FSSD*
✓
✓
✓
--
MVSD
✓
✓
✓
1
NSD
✓
✓
✓
1
USD
✓
✓
✓
✓
0.5
VSFCD
✓
✓
✓
✓
✓
--
* FSSD contracts with cities for the research, collection and management of connection fees
** Sewer charges for swimming pools are based upon metered water use
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March 9, 2012 Permit and Connection Fee Audit
CONCLUSION
Based upon interviews with permit counter staff, some current procedures with the permit
application and issuance process are problematic with the calculating, tracking and collection of
fees. The largest concern is addressing and resolving the accumulated, but uncollected, permit -
related fees in the SunGardTM system. Another primary concern is establishing and maintaining a
standard operating procedure for permit counter related duties. This includes standardized
training in software use, applications of special studies, permit follow -up, research on charge
history and other issues the staff confronts regularly. Other issues include the need for a
comprehensive review of the District's fees and charges, and getting the in- District permit
issuing agencies to require the District's sign off before they issue their final permits or COs to
builders.
Based upon the industry practices survey, there are policies and procedures the District could
employ to increase efficiency in the permit issuance process. Among these are the time at which
fees are collected, establishing sign -off agreements with local agencies and charging service
charges to swim clubs /pools that have sewer connections.
The key findings and recommendations developed in the audit are presented in the Executive
Summary.
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March 9, 2012 Permit and Connection Fee Audit