Loading...
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 Bartle Wells Associates 4 Central Contra Costa Sanitary District 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 Bartle Wells Associates 11 Central Contra Costa Sanitary District 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 Bartle Wells Associates 13 Central Contra Costa Sanitary District 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. Bartle Wells Associates 14 Central Contra Costa Sanitary District 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 Bartle Wells Associates 15 Central Contra Costa Sanitary District 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. Bartle Wells Associates 16 Central Contra Costa Sanitary District 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, Bartle Wells Associates 17 Central Contra Costa Sanitary District 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 Bartle Wells Associates 18 Central Contra Costa Sanitary District 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. Bartle Wells Associates 19 Central Contra Costa Sanitary District March 9, 2012 Permit and Connection Fee Audit