The Department of Public Works' General Fund and Special Revenue Fund Fees

The Department of Public Works charges fees for certain services provided by the Department and for encroachments to the public right of way or work in the public right of way. Fees charged by the Department to provide essential City services can recover but not exceed the costs of providing services, in accordance with State law. However, fees paid by private individuals, firms, or organizations for non-essential services, such as occupying street space during a construction project, are not limited to recovering the costs of services, allowing the Department to charge an assessment for these services equal to a market rate value.

The Department of Public Works has multiple fees, generating revenues that are deposited to the General Fund or special revenue funds. Some fee revenues are divided between the General Fund to pay permit processing costs and market rate assessments, and a Special Engineering Fund to pay permit inspection costs. Subdivision mapping and excavation permit fee revenues are deposited into the Subdivision Fund and excavation permit fee revenues are deposited into the Excavation Fund.

Over the past four years, the Board of Supervisors has approved new or increased Department of Public Works fees, including excavation permit fees and street occupancy fees in 2002, 15 General Fund fees in 2003, and subdivision fees in 2005.

In FY 2003-2004, the Board of Supervisors approved Public Works Code Article 2.1, establishing a new fee schedule for many of the Department of Public Works' General Fund fees and authorizing the Department to increase the fees annually based on the Consumer Price Index, subject to certification by the Controller that the fee increases do not exceed the Department's costs to provide the service. The Board of Supervisors has the authority to modify or increase market rate assessments at any time. The Public Works Code also authorizes the Department to charge additional fees for individual permits if the costs of permit processing and inspection exceed the fee amount.

Table 4.1
The Department of Public Works' Fees

Source: Subdivision and Public Works Codes

The Bureau of Urban Forestry manages sidewalk landscape and street tree permits, fees and inspections, as discussed in Section 3 of this report. The Bureau of Street Use and Mapping manages the other Department of Public Works' fees, and is responsible for issuing permits and conducting inspections to ensure that that permit holders comply with the Public Works Code and permit regulations.

The Department of Public Works Fee Revenues

Prior to adoption of Public Works Code Article 2.1 in FY 2003-2004, allowing the Department of Public Works to increase fees and assessments annually by the Consumer Price Index without further Board of Supervisors approval, the Department only reviewed fees periodically, resulting in fee revenues falling below the Department's costs for providing services. Over the past three years, the Department has increased the amount charged for most of the Department's fees, resulting in increased annual fee revenues.

Table 4.2
Increase in the Department of Public Works Fee Revenues
FY 2003-2004 through FY 2005-2006

Source: Department of Public Works Office of Financial Management and Administration

The Bureau of Street Use and Mapping's Application of Fees

Revising Outdated Code Provisions

The Public Works Code contains several outdated fee provisions that have been superceded by Article 2.1. For example, Section 708 sets an inspection fee of $10 for the first 100 square feet and $5 for each additional 100 square feet for permits to construct, repair or replace sidewalks, gutters, driveways, and related structures, but the Department charges inspection fees of $155, such as for special sidewalk permits, based on the actual costs of inspection.

The Department of Public Works also has not recalculated all fees authorized under the Public Works Code to ensure that these fees recover costs. For example, Section 716, established in 1987, requires a $60 permit fee to install a driveway. The Department has increased the fee over the past three years by the Consumer Price Index to equal $61.94. The Department needs to evaluate this fee and other outdated fees to ensure that the fee amount fully recovers costs.

Assessing Street Improvement Fees for Notices to Property Owners to Repair Streets and New Construction

The Department of Public Works continues to charge street improvement fees under outdated Public Works Code provisions as well as under Article 2.1. When the Department submitted street improvement fees to the Board of Supervisors for approval in 2003 as part of the approval process for 15 General Fund fees, the Department estimated permit processing and inspection costs of $880.85 per street improvement permit. The actual street improvement fee in FY 2005-2006 was $850.58.

The Public Works Code requires street improvement permits for improving streets, filling in street excavations, constructing curb cuts and sidewalks, and other work associated with streets and sidewalks. Property owners are responsible to repair sidewalks that front their property. Property owners may initiate the street improvement permit process, especially in conjunction with property construction permitted by the Department of Building Inspection, or the Department may issue a notice to a property owner to repair sidewalks.

Notices to Property Owners to Repair Streets

The Department of Public Works assesses property owners who receive a notice to repair the sidewalk fronting their property a street improvement fee of $320 rather than $850. Although the Department's web site lists a street improvement fee of $850, the Bureau of Street Use and Mapping maintains a second fee schedule that lists a $320 street improvement fee for permits responding to a notice to repair sidewalks, consisting of $165 for administrative costs plus $155 for inspection.

The Department of Public Works bases the $165 administrative fee on Public Works Code Section 416, adopted in 1987, rather than on a current cost-recovery analysis. Section 416 requires a permit processing fee of $160 for property owners to repair sidewalks or streets fronting their property. The Department should evaluate its administrative costs to process the street improvement fee for property owners issued a notice to repair and submit a fee proposal to the Board of Supervisors for approval during FY 2007-2008. At the same time, the Department should identify obsolete fee provisions in the Public Works Code and submit revised or updated language to the Board of Supervisors for approval to minimize conflicts in applying Public Works Code provisions to permit fee schedules. The Department should also post the same fee schedule on its web site as the fee schedule that it uses to calculate permit fees.

Assessing Street Improvement Fees for New Construction

The Bureau of Street Use and Mapping assesses new construction projects the standard $850.58 street improvement fee. If the street improvement project is large or requires additional inspections, the Bureau assesses additional inspection fees, equal to 7.5 percent of the estimated cost of the construction project. The Bureau collects the Street Improvement fee at the time of the permit application and collects additional inspection fees based on expected additional costs prior to issuing the permit. The Bureau staff prepare a cost estimate of the proposed work under the permit and apply 7.5 percent of the cost estimate as the basis for additional inspection fees.

The Bureau of Street Use and Mapping should review its procedure to assess additional fees to ensure compliance with the Public Works Code. Code Section 2.1.3 specifies that additional fees should be sufficient to recover actual costs and charged on a time and materials basis. The Department should charge additional street improvement fees based on the Department's actual costs to conduct inspections.

Department of Public Works Fees Recovering Less than the Costs of Services

Although the Department of Public Works' fees are adjusted annually by the Consumer Price Index, these adjustments have not kept pace with the costs of providing services. Prior to approval of Public Works Code Article 2.1 in 2003, the Department of Public Works had not increased certain fees for several years, resulting in fee recoveries falling far below the service costs. Article 2.1 was intended to provide annual fee increases equal to the Consumer Price Index to account for increases in the costs of providing services.

Not all Department of Public Works' fees were full cost recovery when initially set, and although these fees have increased annually by the Consumer Price Index, they have continued to fall short of the fee amount necessary to recover costs. Also, because the Department's salary costs have increased at a higher annual rate than the Consumer Price Index, fees that were initially set to fully recover costs now fall short.

The Department of Public Works needs to review and track fee revenues against expenditures each year to ensure that the Department is recovering service costs overall. Although the provisions of Article 2.1 mitigate the Department's previous delays in adjusting fees, the Department still risks revenue shortfalls if fees adjusted by the Consumer Price Index do not keep pace with increasing costs.

The Department of Public Works' Tracking of Service Costs

The Bureau of Street Use and Mapping's Tracking of Labor Hours

The Bureau of Street Use and Mapping does not have an effective method to track the hours allotted to permit processing and inspections. Permit processing staff do not routinely track their hours and therefore, the Bureau cannot document the average labor hours or costs required to perform different types of permit processing.

The Bureau of Street Use and Mapping implemented a Task Management System in July 2005 and implemented a policy, requiring supervisors to include tracking of labor hours in performance evaluations. The Bureau needs to ensure consistent implementation of its polices and use of the Task Management System by inspectors, and should extend the Task Management System to include permit processing. According to interviews, the Bureau's inspectors do not consistently track their hours by permit type or project. Utility inspectors who inspect street excavation work track their labor hours by utility contracts and not by permit type. Street inspectors report that they do not track their hours because they do not have time.

The Bureau of Street Use and Mapping does not accurately capture the number of inspection hours required for each permit type. The Bureau of Street Use and Mapping's projected hours to perform inspections for different types of permits, the actual inspection hours that inspectors report anecdotally that they spend on permit inspections, and the actual hours for specific permit inspections captured in the Bureau's time records do not correspond.

For example, the Bureau projects that street improvement permits require four hours' of an inspectors' time. Street inspectors report anecdotally that street improvement projects require six to eight inspections, exceeding the four hour projection. However, actual time records show an average of one hour of street inspector's time allotted to each permit, suggesting that the time record system does not accurately capture permit inspection hours.

The Department of Public Works has set excavation permit fees based on inspecting medium excavation projects one to two times per week on average and large excavation projects three times per week on average. The excavation inspectors, however, report that they inspect both medium and large jobs at least once per day, if not more. Consequently, the Department may not have set the excavation permit fee to fully recover costs because the cost calculations use a different estimated frequency of inspections.

Because fee revenues fund much of the Bureau of Street Use and Mapping's activities, the Bureau needs to ensure that fees accurately reflect the Bureau's activities. The Bureau required that its supervisors review their staff's time records as part of the FY 2005-2006 performance review. However, according to interviews with some inspectors, the supervisors did not consistently review time records. The Bureau should evaluate actual inspection time allotted to permitted projects and ensure that Bureau staff are accurately recording their project hours.

The Bureau of Street Use and Mapping's Management of the Permitting Process

Plan Checkers' Understanding of Policies and Procedures

The Bureau of Street Use and Mapping's permit staff lack sufficient training and oversight in permit processing policies and procedures. In a review of excavation, temporary occupancy, and street improvement permits, the Budget Analyst found that the Bureau's permit staff did not fully understand the Bureau's procedures for all types of permits. For example, the Public Works Code specifies that the Bureau should charge permit holders $51.61 per block face per day for a permit extension and a $50.00 processing fee for a date change. Of the eight permit staff interviewed, only three permit staff knew that permit extensions should be charged $51.61 per block per day, and none of the eight individuals interviewed knew the correct charge for a date change.

Table 4.3
Temporary Occupancy Permit Extension and Date Change Fees

The plan checkers were also not certain of the excavation permit extension and date change fees.

Table 4.4
Excavation Permit Extension and Date Change Fees

Plan checkers are also uncertain about permitting procedures unrelated to fees. For example, plan checkers use different criteria when determining whether or not to check the "call for" boxes on temporary occupancy permits. Temporary occupancy permits have three call for boxes: (1) inspection, (2) post tow-away register for posting, and (3) special traffic permit may be required. Based on interviews with plan checkers and as shown in Table 4.5 below, some plan checkers always check the inspection box, while other plan checkers never check the box. The criteria that plan checkers use to determine when to check the post tow-away register for posting box and the special traffic permit box vary even more widely. Only two plan checkers used the same criteria, "check if blocking traffic lane," to determine when to check the special traffic permit box.

Table 4.5
Criteria for When to Check Call For Box

Supervisory Review of Plan Checkers' Performance

The Bureau of Street Use and Mapping's supervisors state they do not regularly review plan checkers' work. Although the senior plan checker and the associate engineer maintain an open door policy, regularly ask plan checkers if they have any questions, and review the complex permits, the senior plan checker and the associate engineer do not regularly review less complex permits for quality control. According to the Bureau manager, the Bureau supervisors periodically review permits and staff receive training to refresh staff knowledge. Additionally, the Bureau supervisors evaluate permit staff on the number of permits issued as well as the relative complexity of the permit.

Nonetheless, the above-described inconsistent and frequently inaccurate application of fee requirements and the lack of standardized criteria for checking the call for boxes show the need for continued staff training and reinforcement in applying the Bureau's policies and procedures, and for evaluating and enhancing the Bureau's quality controls.

Additionally, the Bureau of Street Use and Mapping's permit fee list and written guide for issuing permits do not include all fee requirements. The Bureau needs to review its permit fee list and written guide and include all fee and permit requirements and applications not currently included.

Work Procedures and Work Load Management

District Inspections

The Bureau of Street Use and Mapping's district inspectors conduct inspections of public streets to identify safety hazards, including notifying property owners of the need to eliminate identified safety hazards and re-inspecting hazards to ensure they have been removed or repaired to the standard described by the Public Works Code. Most of these inspections are initiated by calls from citizens who have observed a safety hazard. According to the Bureau's policy, district inspectors should conduct routine inspections to identify safety hazards and Code infractions as well as respond to citizen complaints. The current approach results in more frequent inspections and citations in neighborhoods with a high volume of calls, rather than high level of risk, leading to unequal enforcement of the Public Works Code.

In the past, district inspectors have conducted block-by-block inspections, inspecting each block of a given street from beginning to end. However, district inspectors report that they have not conducted any block-by-block inspections in at least seven months because they are overwhelmed by the number of citizen complaints. The Bureau of Street Use and Mapping management acknowledges the problem and intends to start a new type of inspection known as a "focus inspection." According to one Bureau manager, focus inspections will be conducted at least three times per year and will cover 30 to 40 square blocks in areas with high pedestrian volume or in areas requested by the Mayor and/or the Board of Supervisors. To ensure that the Bureau is implementing the focus inspections and informing the Board of Supervisors about the effectiveness of inspections in their district, the Bureau should report back to the Board of Supervisors City Operations and Neighborhood Services Committee following each focus inspection. If the focus inspection occurs in the District of a Supervisor who does not sit on the City Operations and Neighborhood Services Committee, the Bureau should notify the Supervisor about the meeting.

Street Inspector Organization

The Bureau of Street Use and Mapping street inspectors are divided into three groups: (1) district inspectors, (2) special projects inspectors, and (3) construction-related street inspectors. District inspections are funded by the General Fund, and are organized by zip code; each district inspector responds to the complaints in his or her zip codes. Special projects inspectors are also funded by the General Fund, and perform both permit and complaint driven inspections to ensure compliance with regulations related to utilizing the public right of way for the storage of garbage containers, posting of signs, and banners.

Construction-related street inspectors are funded by permit and fee revenues, and inspect permitted work to ensure the work conforms to the permit and the Public Works Code. These inspectors are subdivided by permit type into three subgroups: utility inspectors, street improvement inspectors, and commercial inspectors. Utility inspectors inspect permits related to roadway excavations for installation or repair of utilities. Street improvement inspectors inspect permits related to building construction. Commercial inspectors inspect permits related to commerce such as tables and chairs or display merchandise permits. Construction-related street inspectors are further subdivided by zip code. All Bureau inspectors share the same classification (6230 Street Inspector), must pass the same entrance examination, and are cross-trained in all permit types.

Organizing street inspectors by permit type is inefficient for the reasons outlined below.

First, multiple inspectors are assigned to each zip code. Zip code 94118 in the Richmond is a residential area, but also contains the commercial corridor along Geary Boulevard. As a result, 94118 is staffed by a utility inspector, a commercial inspector, and a street inspector, each of whom drives from the Bureau's offices in the Civic Center to the Inner Richmond district each day, a drive which takes about 30 minutes, depending on the time of day.

In addition, some street inspectors cover a very large geographic area. One street inspector covers 94114, 94116, 94117, 94122, 94127, and 94132, which includes the Twin Peaks, the Sunset, Lake Merced, and West Portal neighborhoods. The size of this area requires that the street inspector spend a significant amount of time driving from inspection site to inspection site.

Finally, because street inspectors are only responsible for certain permit types, they do not act on problems unrelated to their area of responsibility. During ride-alongs with street inspectors, the Budget Analyst observed a number of street inspectors point out a problem unrelated to their area of responsibility but neglect to take action. Even if the street inspector had referred the problem to the appropriate Bureau inspector, the response would be inefficient. It would take additional time to refer the problem to the responsible inspector, and for the responsible inspector to schedule a visit and travel to the zip code. According to the Bureau management, street inspectors should respond to any violation they see, not just violations relevant to their permit area. However, street inspectors report they are too busy to respond to violations not relevant to their permit area.

The Bureau of Street Use and Mapping should more accurately track the number of inspection hours per permit and the number of inspections by permit type per district, and use this information to more efficiently allocate inspector resources to reduce travel time and to match inspector assignments to fluctuations in seasonal workload. In addition, the Bureau should identify ways to increase inspectors' accountability for enforcing all permit violations within their area of responsibility, thereby ensuring more consistent permit and Public Works Code enforcement.

Conclusion

The Department of Public Works needs to ensure that its permit fees, which are intended to recover the costs of services, are sufficient to fully recover these costs.

Inaccurate application of fees, such as the street improvement fee assessed to property owners who have been issued a notice to repair sidewalks or streets fronting their property, can also result in insufficient revenues to cover costs. Also, the Department needs to ensure that fee adjustments based on the Consumer Price Index are sufficient to cover the increased costs of providing services. Because the Department's salary costs are increasing at a greater rate than the Consumer Price Index, the Department needs to review and adjust fees regularly.

The Bureau of Street Use and Mapping needs to improve the tracking of costs of providing services, especially the labor hours needed to process permits and conduct inspections. The Bureau also needs to ensure that permit staff are trained in consistent application of permit procedures, ensuring that all procedures are included in the written guide and that fee lists are complete.

Finally, the Bureau of Street Use and Mapping needs to ensure inspector allocations to permit types and geographic areas are efficient, taking into account travel time and fluctuations in work load and revenue streams and to increase accountability among inspectors for all permit work, inspections, and code enforcement within their area.

Recommendations

The Director of Finance and Administration should:

Costs and Benefits

The Department of Public Works would have realized an estimated $1.4 million in additional fee revenues in FY 2006-2007 by increasing all General Fund fees to fully recover costs.