DBI fee study finds 73% cost recovery; CBOs press to embed $4.8M in fee plan

Deputy Director Alex Koskinen told the Building Inspection Commission on Jan. 11 that a consultant study found the Department of Building Inspection (DBI) currently recovers "approximately 73% of the department's costs," projecting $61,000,000 in fee revenue against full-cost estimates of $84,000,000.

The study, performed by consultant NBS at DBI's direction, compared San Francisco fees with those in Los Angeles, Oakland, San Diego, San Jose and Santa Clara and calculated fully burdened hourly rates for permit, inspection and administrative services. Koskinen said staff recommended moderated fee increases and a mechanism to adjust fees annually to avoid creating sudden, disproportionate burdens on specific payers.

Why it matters: DBI is an enterprise department whose operating budget is principally funded by permit and inspection fees. Staff said adopting the consultant's full cost-recovery fees immediately would close a projected gap of about $23 million but could produce large jumps for some individual fees. Koskinen said staff plans to phase increases and use existing fund balance when necessary to limit short-term impacts.

Community-based organizations pressed the commission to include their operating grants in the fee model. Becky, identified as contracts and services director at Calzio Justa Just Cause, told commissioners, "it's really imperative that the CBOs ... are considered as a part of the cost recovery amount," arguing reliance on the general fund is unsustainable. Maria Samueli, interim executive director of the Housing Rights Committee of San Francisco, said her group's operating need is $5.2 million but they currently receive $4.8 million; she asked the commission to consider raising the CBO allocation to $5.6 million to meet staffing and inflation pressures. Sonica Mahajan of Dolores Street Community Services emphasized that CBOs provide language-access services that are integral to DBI's work.

On forecasting, Koskinen told commissioners staff believes the consultant's three-year average volume assumptions are optimistic and said DBI expects lower revenues this fiscal year than the consultant projects. "We report it monthly to you and we're a little bit below where we're budgeted," he said, adding a staff estimate of roughly $52,000,000 for the current year and about $65,000,000 for the next year compared with consultant projections of $61,000,000 and $75,000,000 respectively. Koskinen said DBI will use conservative revenue estimates for budgeting while keeping the consultant's fee amounts as a policy input.

Commissioners requested more granular impact information. One commissioner asked which classes of stakeholders would be unduly burdened by specific increases; Koskinen said the impact is fee-by-fee and pointed commissioners to tables in the study showing recommended percent recoveries and sample fee changes (for example, a $500-valuation new construction permit fee rising from $65 to a staff-recommended $117 in one illustrative case). Commissioners also asked about deletions of obsolete fees (reinspection fees were deleted because they are no longer charged), how overtime is reflected in the model (overtime is included in the study's calculations), and why some apartment and hotel license lines were capped below full cost recovery to limit large percentage increases.

Next steps: staff said the fee-study impacts will be incorporated into DBI's proposed budget at special budget meetings on Jan. 17 and in early February. Trailing legislation to amend the San Francisco Building Code is expected to be drafted in March and the department will present its budget in May. DBI staff said they hope in future years to obtain authority to make annual fee adjustments timed to the start of the fiscal year; absent that authority, fee ordinance timing likely means fee changes would take effect around Aug. 1.

Procedural note: the Commission held public comment on item 2, accepted testimony from multiple CBO representatives, and then adjourned; DBI will return proposed budget figures and trailing legislation for Board and mayoral review per the schedule described.