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Home My WebLink About07.a.1) Update on permit counter and connection fee collection matters and proposed fee recovery plan.7a. 1) Central Contra Costa Sanitary District June 28, 2012 TO: THE HONORABLE BOARD OF DIRECTOR 40b VIA: ANN E. FARRELL, GENERAL MANAGER �,Y JARRED MIYAMOTO- MILLS, PROVISIONAL ENVIRONMENTAL SERVICES DIVISION MANAGER FROM: TOM GODSE) SENIOR ENGINEER SUBJECT: OUTSTANDING DEVELOPMENT SERVICES FEES - UPDATE At its March 15, 2012 regular meeting, the Board received a report on the recently concluded Audit of Permit Counter and Connection Fee Connection Practices by Bartle Wells Associates. The Board directed staff to report progress on implementing the audit's recommendations at each subsequent Board meeting. This memo presents our seventh report. Over the past two weeks, staff has done the following: • Initial evaluation of all outstanding fee applications has been completed. Attachments 1 and 2 detail how the results have been classified. • Continued chain -of- authority sign off on the application -by- application worksheets completed by Accountemps staff and developing the process for documenting the manual correction of fees in the SunGard BP program. • Continued drive -by field inspection of application sites where research indicates that fees may be owed. Seventy -four (74) sites have been identified for further follow -up with local building permit jurisdictions and inspections by appointment where needed. • Developed a recommended process for verifying and collecting fees owed. The recommended process is described in a separate memo to the Budget and Finance Committee included in the agenda packet for the Committee's July 2nd meeting. The evaluation team's first -pass work to categorize applications as either "fees not owed" or "fees possibly owed" has been completed. Collection efforts may extend into 2013 depending on the volume and complexity of applications where we determine that fees are collectible. BTG:dp Attachments NAENVRSEMPosition Papers \Godsey\2012 \Board Memos \7- 5- 12\Memo the BOD re Status 7 -5 -12 FINAL2.doc Outstanding Development Services Fees Page 2 June 28, 2012 SunGard Report Output Revised: 6 -28 -2012 1484 Applications No Fees Owed $19.1 M 1762 Applications Showing Fees Entered $21.4 M 278 Applications Possible Fees Owed (Additional Research & Inspection Needed) $2.3 M N: \ENVRSEC \Position Papers \Godsey\2012 \Board Memos \7- 5- 12\Memo the.BOD re Status 7 -5 -12 FINAL2.doc Attachment 1 0 Applications Yet to be Reviewed $0 Outstanding Development Services Fees — Update Page 3 of 3 June 28, 2012 Attachment 2 N: \ENVRSEC \Position Papers \Godsey\2012 \Board Memos \7- 5- 12\Memo the BOD re Status 7 -5 -12 FINAL2.doc Potentially Collectible Not Owed Total or yet to be reviewed (Active, Paid or to be removed) Description Number Active Applications 143 $ 4,469,119 20.9% 143 $ 4,469,119 20.9% (expect permit issuance in future) Possibly collectible, 174 $ 1,193,268 5.6% 174 $ 1,193,268 5.6% Additional research & field inspection needed Main Line Extensions - Active, canceled, closed, paid or 97 $ 625,025 2.9% 97 $ 625,025 2.9% postponed No Fees Currently Due — to be manually removed 282 $ 12,972,815 60.7% 282 $ 12,972,815 60.7% Paid in full - since report was created in December 2011 37 $ 266,537 1.2% 37 $ 266,537 1.2% Partial payments received prior to OFR - $ 410,548 1.9% - $ 410,548 1.9% Being Paid /Financed (Capacity Use Charge Program, 1 $ 21,388 0.1% 1 $ 21,388 0.1% CADS, AVADs, Septic Conversion Installment Payments) Side Sewer Applications less than $1,000 810 $ 268,147 1.3% 810 $ 268,147 1.3% (Code Enforcement Follow -Up) Other Applications less than $1,000 114 $ 23,164 0.1% 114 $ 23,164 0.1% Septic conversion (TBD) 104 $ 1,126,904 5.3% 104 $ 1,126,904 5.3% Total i 00.0% N: \ENVRSEC \Position Papers \Godsey\2012 \Board Memos \7- 5- 12\Memo the BOD re Status 7 -5 -12 FINAL2.doc 7a. Central Contra Costa Sanitary District June 29, 2012 TO: THE HONORABLE BOARD OF DIRECTORS 0" VIA: ANN FARRELL, GENERAL MANAGER JARRED MIYAMOTO- MILLS, PROVISIONAL NVIRONMENTAL SERVICES DIVISION MANAGER FROM: THOMAS BRIGHTBILL, SENIOR ENGINEER "Y�w SUBJECT: COLLECTION OF OUTSTANDING FEES AND CHARGES This memo presents a recommended fee collection program for certain fees owed to the District that were discovered during a recent audit of the SunGard system. Several policy issues associated with the recommended collection program are presented for review. Background An audit report prepared by Bartle Wells Associates submitted in March 2012, and "Outstanding Fee Reports" run by staff identified up to $21.4 million in "entered, but uncollected fees" in CCCSD's SunGard enterprise software. Concurrent with the preparation of the audit report, CCCSD staff began a thorough investigation of these fees. This investigation determined that these fees fell into several categories including: • Active applications for sewer service — fees to be collected when future permits are issued (approximately 21 %). • Quotations for connection fees calculated using the SunGard software where no connection has occurred. These quotations were incorrectly stored in SunGard as fees owed to CCCSD (approximately 61 %). • Quotations for connection fees calculated using the SunGard software for connections that may have occurred, but where the customer failed to pay fees and pull a District permit. These fees have been referred to as "Possibly Collectible" in status update presentations to the Board (approximately 6 %). • Quotations for converting septic tank use to public sewer service where a connection may have occurred, but where the customer failed to pay fees and pull a District permit (approximately 5 %). • Applications where fees entered are less than $1,000. These are applications where permit and inspection fees were quoted, but permits were not issued and work was not inspected. That is, no service was rendered — so the applications will be handled as possible code violations for unpermitted work (1 %). Collection of Outstanding Fees and Charges Page 2 of 5 June 29, 2012 • Fees that have been paid either before or after preparation of the outstanding fee report (approximately 3 %). • Plan Review and Inspection fee quotes for active, cancelled or postponed main sewer extension jobs. These fees are either not owed, in the case of cancelled jobs, or will be collected when future construction permits are issued (approximately 3 %). As of June 29, 2012, the total amount of fees that may be due from the 174 "Possibly Collectible" applications (excluding the 104 septic system conversion quotes) is about $1.2 million. Most of these Possibly Collectible fees require additional records research, inquiries to local building departments and field verification. This work is still in progress, and it is likely that we will confirm that some fees are not due, thereby reducing the final total to something less than the current total of $1.2 million. Special Considerations Several issues were identified while preparing the recommended fee collection program which are worthy of review and discussion. These include: • Is there a maximum length of time after which CCCSD should no longer attempt to pursue collection of fees? • To what lengths should CCCSD go to in order to collect fees from responsible parties? • Should fees be charged at current rates as required in the District Code, rather than the rates applicable at the time the connection was made? • What steps can /should be taken to collect the fees? Maximum Length of Time: Some of the fees in the SunGard Building Permit system were entered as far back as 1994, when the SunGard software was commissioned. Assuming a connection was made shortly after the application or quote was entered into the system, some of the fees owed could be for connections that occurred up to 18 years ago. District Counsel has indicated that while there are several sections of the Civil Procedure Code that could apply to the collection of these fees, the most likely interpretation is that legal action to collect the fee could be taken for up to four years from the date that the connection was discovered by the District. This would mean that connections that may have occurred up to 18 years ago could be legally collected if the actual connection resulting in fees owed was first identified and confirmed during our current Outstanding Fees Report investigation. During the investigation, however, it was observed that a few of the applications where fees may be due have notes indicating previous District inquiries or actions concerning N: \ENVRSEC \Position Papers \Godsey\2012 \Board Memos \7- 5- 12\Memo- Recommended Outstanding Fee Collection Program 7 -5- 12 FINAL.doc Collection of Outstanding Fees and Charges Page 3 of 5 June 29, 2012 the connection. Based on District Counsel's guidance, the District may be unable to legally compel the responsible party to pay the fee if evidence exists that the District knew about the connection more than four years ago. District Counsel's guidance would also appear to indicate that the District can request payment of any fees discovered more than four years ago even though the District may not legally be able to compel payment of these fees. Determining the Responsible Party: District Counsel has indicated that if ownership of a parcel with fees owed has changed since the connection was made, the proper course of action is to determine the owner at the time the connection was made and attempt to collect the fee from that owner rather than the current owner of the parcel. In cases where ownership has changed and a developer or contractor is the responsible party for payment (as the "applicant for wastewater utility service "), the District should attempt to collect the fee from that developer or contractor. Charging at Current Rates: The District Code requires that fees be charged at the rate applicable when it discovers that the fees are owed. For the purposes of the first demand letter, staff will use this approach. Depending on the situation, the Board may want to consider charging at the rate when the connection was originally made as an inducement to obtain payment. The Board may also want to consider under which situations it may allow installment payment of fees owed. Collection Options: If initial efforts to collect the fees owed through demand letters fail, the next step would be to record Certificates of Unpaid Charges on any California property owned by the responsible parties (effectively placing a lien on these properties) and schedule a public hearing for the Board to consider placing the unpaid fee (and any delinquency charges and penalties) on the property tax bill. Placing these charges on a property tax bill would require notifying the property owners of the date and time of the public hearing and of the actions that the Board will consider. It is likely that the recommended fee collection program, including the potential placement of these charges on property tax bills and /or placing liens on property owned by the responsible parties, will result in a number of responsible parties appealing staffs determinations to the Board. Recommended Collection Program for Cases Where Fees are Discovered within the Four -Year Statute of Limitations District staff, after consultation with District Counsel, has developed a program to collect fees actually owed from property owners, developers and contractors. The steps in the recommended fee collection program are summarized below and shown graphically in Figure 1: N: \ENVRSEC \Position Papers \Godsey\2012 \Board Memos \7- 5- 12WIemo- Recommended Outstanding Fee Collection Program 7 -5- 12 FINAL.doc Collection of Outstanding Fees and Charges Page 4 of 5 June 29, 2012 • Determine whether the fee is actually owed by doing additional records research, consulting with local building inspection officials, and conducting field verification when needed. • Determine the "discovery date" by considering the application date, the probable date of connection (if determinate) and the dates of any previous District inquiries or actions concerning the connection (for example, when was the property placed on the Sewer Service Charge roll). • Determine if ownership of the property has changed since the connection and if so, determine the previous owners and contractors who may be responsible for paying the fees under the District Code. • Send a "demand letter" to the responsible parties requiring payment within 45 days (the period allowed in the District Code to avoid delinquency). The letter would also instruct the responsible parties to contact the District and provide any evidence they may have indicating that the fees have actually been paid or any other factors they believe may affect the applicability of the fees. • If payment is not received within the 45 -day period, the fees would then be delinquent. The District Code requires that a delinquency charge of ten percent (10 %) of the unpaid amount be added and subsequent monthly penalties accrue at 1.5% per month until the fee is paid. • Send a second demand letter which includes the delinquency charge and penalties, and describes the additional steps the District will take to collect the fee, such as possible Board action to place unpaid amounts on the property tax bill or to record "Certificates of Unpaid Charges." • If payment is not received, the following steps would be taken to collect the fee: o File a Certificate of Unpaid Charges on properties in California owned by the responsible parties; • Hold a public hearing for the Board to consider placing unpaid amounts on the property tax roll; • Place the unpaid amounts on the property tax bill. For situations where four years has elapsed since the original discovery, staff will follow the first five steps above, but will stop short of putting the delinquent payment on the tax rolls as this would not be legally supportable given the expiration of the statute of limitations. Attachment N: \ENVRSEC \Position Papers \Godsey\2012 \Board Memos \7- 5- 12\Memo- Recommended Outstanding Fee Collection Program 7 -5- 12 FINAL.doc Collection of Outstanding Fees and Charges Page 5 of 5 June 29, 2012 Figure 1 Possibly Collectible 278 Applications ($2.3 million + / -) Preliminarily ID'd I I Septic Conversion Inquiries as Unpaid Connection' 174 Applications 104 Applications ($1.2 million + / -) 1 1 ($1.1 million + / -) Confirmed as N Remove from Connection SunGuard. and Appears No Further Action Collectible? >> VA Discovered in \ Last 4 Years ?z N WA Current Owner N Determine Owner (or same as Contractor) at Time of Owner at time Connection of application? Notes: 1. Y 2. Send Demand Letter to Responsible Party(s) 3. Payment Y Fees Paid Received within No Further Action 45 Days? 1 Fees Now Delinquent Send 2"d Demand Payment Received? N lv 4. Future Phase of Collection Program Research and field confirmation work in progress. Expected completion by 12/31/2012 Also no prior attempts to collect fee prior to 7/1/2008 Delinquency charge added as well as monthly penalty until paid. Second demand letter to outline additional steps that will be taken to collect fees. Number of applications and total amounts current as of 6/29/2012 -------------------------- Place Unpaid Fees on Property Tax Bill ------------------------- ' Hearing to Place Unpaid Fees on Property Tax Bill -------------------------- o File Certificate of Unpaid Fees