Cary Town Council Work Session Minutes

June 1, 2006

Subject:  Proposed Grading Fee Increase for FY07 Budget

120 Wilkinson Avenue

Police Department Training Lab

Present:  Mayor Ernie McAlister, Council Members Marla Dorrel, Michael Joyce, and Nels Roseland

Absent:  Mayor Pro Tem Jack Smith, Council Members Jennifer Robinson and Julie Robison

Mayor McAlister called the meeting to order at 9:35 a.m.

The staff report from the May 23, 2006 budget work session is included herein.

STAFF REPORT

Budget Work Session, May 23, 2006
Consideration of Adjusting Grading Permit Fee (EN06-144) 

Speaker:  Terry Warren, P.E., Stormwater Services Manager

From:  Tim Bailey, P.E., Director of Engineering

Prepared by:  Matt Flynn, CPESC, and Terry Warren

Approved by:  William B. Coleman, Jr., Town Manager
Approved by:  Benjamin T. Shivar, Assistant Town Manager

Existing program:

In 1985 the Town of Cary adopted a local sedimentation and erosion control program. This was in response to increasing demand for greater regulatory control over environmental impacts from development. Since the program’s inception, the Town of Cary has become a leader in sediment regulation, and has been recognized by the State of North Carolina as the premier statewide program in 1998 and again in 2001. The Town of Cary enforces ordinances based upon the Sedimentation Pollution Control Act of 1973. These ordinances are confined to regulating sedimentation only. Water quality issues, specifically turbidity, are regulated by the State Division of Water Quality.

The North Carolina sedimentation design manual is used as the baseline for approved practices in controlling sedimentation. The Town of Cary requires all development plans to meet the State design requirements, and in most cases exceed State requirements. All sediment control devices are limited in effectiveness. Most devices capture between 50%-60% of sediment discharge. In July 2004, The Town of Cary, based upon research at NC State University, began requiring a new technology, skimmer sediment basins that capture between 75%-80% of sediment. These skimmer sediment basins are not yet required by the State regulatory agencies however the State is set to change its design manual in June of 2006 to require these devices to be used. This is just one instance where the Town is in the forefront of environmental stewardship. The Town of Cary is also more restrictive than the State Land Quality Section and most jurisdictions with an erosion control program, in the threshold for requiring an erosion control plan. The Town requires an approved erosion control plan for all activities denuding 12,000 square feet (1/4 acre) or more, whereas the State Land Quality Section requires a plan for denuding one acre or more, as do most jurisdictions. This allows for better control of smaller sites that may impact existing citizens especially the small in-fill sites. Cary also inspects new single family construction sites prior to building construction to ensure erosion control measures are in place. The single family residence inspection was a cooperative effort between the Town of Cary and the Homebuilders Association of Wake County. No other jurisdiction requires this inspection and it goes a long way to providing erosion control protection at a time in the construction sequence when the site is most vulnerable, another instance of the Town leading the way.

The Town of Cary is staffed with three Certified Professionals in Erosion and Sediment Control (CPESC). In addition, two of the staff has considerable background in state water quality regulations, having worked for the State Division of Water Quality (DWQ) for several years. In total, Town of Cary staff has 59 years of regulatory experience. In addition to experience, inspection frequency is one of the most important aspects in developing a successful regulatory program. The average inspection frequency on new projects in Cary is once every 1.5 weeks, while the State Land Quality Section inspection frequency is once every 4 months. State regulatory standards for offsite sedimentation from any project are described as slight, moderate and severe. Slight offsite sedimentation is defined as 1-9 cubic yards, moderate as 10-99 cubic yards and severe as greater than 99 cubic yards (For visual reference 1 cubic yard is a cube of sediment 3 feet x 3 feet x 3 feet).  As a result of inspection frequency in Cary , an overwhelming majority of projects have very slight offsite sedimentation discharge. In most cases, this offsite discharge can be attributed to the limitations of sedimentation control technology.

Plan review is a very important component of the Sediment and Erosion (S&E) program. S&E staff review development plans to ensure that the proposed development complies with all applicable stormwater and environmental mandates including erosion control regulations, this includes ensuring that sediment basins are the correct size and in the proper location and silt fence is adequate and located properly, construction entrances are properly sized, for example. Over the last five fiscal years staff is reviewing on average approximately 31 development plans per month, issuing 6 grading permits, and performing 268 site inspections monthly.

Over the last five fiscal years the number of permitted denuded acres has increased from 242 acres in FY02 to 1061 acres so far this fiscal year (FY06). The average denuded area per permit has increased from 4.2 acres in FY02 to 13.1 acres in FY06. In this time frame the number of site inspections has remained relatively constant, form a low of 1860 to a high of 2601, averaging 2214 per year meaning that the frequency of a particular site being inspected has diminished and if this trend continues at current staffing levels will further diminish. 

Program comparison:

The following table compares the Town’s erosion control program to several others in the region.

* Wake County provides erosion control inspections for the 6 municipalities that do not have an approved sedimentation and erosion control program

Possible program enhancements:

The Town’s erosion control program could be enhanced by, among other things, increasing the frequency of site inspections. This could be achieved by one of two ways 1) reduce the time spent on other duties or, 2) add additional staff. Reducing the time spent on other duties is not a viable option in that the other duties are necessary to carry out the Town’s other mandated programs such as illegal discharge detection and elimination and buffer/stream determinations associated with the Town’s NPDES PhII permit requirements and the Neuse River buffer and pollutant reduction responsibilities. Responding to citizen queries takes up a significant block of time also.  Adding additional staff would reduce the workload burden of the inspection staff and make time for additional site inspections. Adding an inspector would allow the Town to provide approximately 1100 additional site inspections per year. This would increase by approximately 33% the times a site would get visited during the course of a year.

Establishing ground cover through the use of grasses and shallow rooted plant material is very efficient at restraining erosion. The Town currently requires that any denuded land that lays inactive for more than thirty consecutive calendar days be seeded and mulched. Land on fill slopes have a fifteen day seeding requirement. On large scale projects staff could look at the possibility of requiring that grading be done in phases or limiting the amount of denuded area in a project at any given time and/or enlarging tree save areas. This works well for the Town but it does not work well with the development community in that it would require multiple mobilizations in order to get a single project completed. The installation of larger, potentially more efficient sediment basins is another possible program enhancement. Again, this option is not feasible in that larger basins would be very difficult to “site” as sediment basins are topographically restricted in where they can be placed and space or area becomes very critical.   

Fiscal Impact:

The addition of an erosion control inspector would increase the Engineering Department’s overall operating costs by approximately $72,172 for FY07.  This includes salaries, benefits, vehicle, computer, furniture, administrative support, etc. Currently the Town charges $165 per acre for a grading permit. This generates on average $90,255 in revenue per year (FY02 thru FY06). In FY03 the Town took in $35K in revenue from grading permits and in FY06 the town has taken in $175K YTD. Currently it cost the Town $339K to run the program for a year (roughly $320/denuded acre or about $128 per acre per person). Staff would recommend that the grading permit fee be increased to $500 per acre. This would have generated approximately $530,500 in revenue based on FY06 permit levels. This would generate revenues to support current staffing levels during times of economic downturn. Keep in mind that the revenues generated by the grading permit fee, over time, cannot exceed the cost of the program. Also the elements of the program have to be directly related to controlling erosion.

$500 per denuded acre would have averaged $249K in revenues over the last seven fiscal years.

Recommendation: Staff recommends that the fee for a grading permit be increased from the current rate of $165.00 per denuded acre to $500.00 per denuded acre. If council wishes to expand the current program through hiring staff and additional $175 per employee could be added to the per acre fee.

Council Discussion

Mayor McAlister stated that the work session is in response to a request made at the May 25th council meeting that the developer group be provided with an opportunity to weigh in on the grading fee increase approved by council at the May 23rd work session, which would increase the fee from $165 an acre to $500 an acre.

Mr. Ken Kirby of The Homebuilders Association of Raleigh and Wake County stated that the developers wanted an opportunity to explain what the increase does to their business plan. He said it is a significant increase and they would like to understand what will be accomplished by increasing the grading fee.

Mr. Mike Hunter of W&W Partners stated that the purpose of the fee increase was unclear. He said that all things are not equal in the development business and they would like to better understand the goal because they may be able to suggest alternatives.

Mr. Roseland provided a copy of a Grading Fee Comparisons chart which compares Cary ’s grading fee permits with several neighboring municipalities. (A copy of that chart attached to and incorporated herein as Exhibit A.)  He stated that in reviewing the various fees, taxes and revenues received by the Town the current grading fee appears to be low. He said that existing issues are (1) whether the grading fee charges pay for the enforcement of the engineering and environmental standards, and (2) whether the current approaches to development outlined in the Town’s engineering and environmental policies are good ones.

Mr. Roseland said that there are 2-1/2 employees who visit the various sites being developed throughout the Town, and the enforcement costs to the Town are about $339,000 a year. He said that the Town recovers about 52 percent of its cost—about $175,000—with the current $165 per acre fee. The rest of those costs—48 percent of the fees—are subsidized by the Town. Various options were laid out in the staff’s report to achieve the objective of cost recovery for existing enforcement activities. Mr. Roseland said that the issue is whether enforcement should pay for itself or whether the Town should continue supporting those costs. He stated that the Town’s limited staff is covering more than 1000 acres a year and there have been a few problems because they are being stretched really thin.

Mr. Roseland said that the overall issue is the appropriate fee to charge for the enforcement activity to pay for itself and whether council should agree that the activity pay for itself. He said that staff has been tasked with options for engineering and LDO updates and changes. Another issue is whether more enforcement is needed given how thin the staff is stretched.

Mayor McAlister stated that there seemed to be a significant increase in the number of acres graded in 2006 over prior years. If the increase in trend continues it would lend credence to the argument that more enforcement activity is needed. He said that cost recovery is one of the arguments; the other two are limiting the number of denuded acres, and whether something different needs to be done to discourage slab development.

Mr. Hunter said that there are many developers who do not have mass grading projects. He said that one problem is that all of the developers in the community are being lumped together, penalizing everyone with a blanket fee for what appears to be specific issues. He said that enforcement issues may need to be greater in certain areas, but he doesn’t believe that raising the fee across the board is a balanced or equitable approach.  Mr. Hunter stated that he doesn’t believe there will be long term continuation of the level of enforcement needed because of the available land mass and the size and magnitudes of the potential projects.

Mayor McAlister asked if having the proposed fees in place six months ago would have made a difference. Mr. Hunter responded that he doesn’t believe it would have had any impact.

Mr. Boots Elam of Elam , Todd, d'Ambrosi, PA stated that the Town has conflicting goals.  He said that the northwest land use plan is really densified. He said that when the plan was done it densified a portion of west Cary that has some of the most severe topography in Cary ’s jurisdiction. He stated that there is no way to achieve the densities in the plan without mass grading, and increasing the fee because of that is penalizing developers for what the Town has put in the plan.

Mr. Roseland said that $500 an acre is for the existing policies on grading and environmental standards and enforcing those standards to pay for themselves.  He said it is not an increase in fee to finance or punish behavior on grading; it is to pay for the current operation itself. The $320 and $500 options are what it would cost to recover the costs of existing staff with the existing policies.

Mr. Hunter said that the intent is to recover the costs and the greater need is in the areas such as western Cary .  He said the types of developments his company does are less dense and not mass graded; however, they will bear the greater burden to cover the cost of enforcement for someone else who is mass grading.

Mr. Coleman said that the issue is the volume or amount of inspection activity that has to occur, not types of grading. Mr. Bailey added that permits are based on denuded acres—if you denude less you pay less. He said that there is less activity on a project that is 50 percent denuded but that project is paying less because the Town charges on a denuded acres basis. He said that a big site takes more time to enforce but they also pay more because they have more acres to denude.

Mayor McAlister said in order to keep parity among developers a tiered fee is a possibility to consider, depending on the density of development.  He said that it is possible that the most intense tier would be even higher than it is now and he didn’t’ see how that could match up with the programming paying for itself.

Mr. Hunter asked about the Town’s anticipation for future growth. Mr. Bailey responded that next year the Town would probably be in the 800 acre range. He said that there is a possibility that it will drop, but that is only a guess. Mr. Bailey said that staff can look at the activity currently out there which will probably be below the 1000 acre threshold for next year; that is the reason for the recommendation to have than the $320 for cost recovery.

Mayor McAlister asked if a tiered system would significantly add to the administrative burden of managing the program. Mr. Bailey replied that as long as the threshold changes could easily be define, whether based on density of the project, units per acre, or something similar, then staff would not have a difficult time managing the system. He said that it would take a little more effort than having a one size fits all system, but the administration would not be significant as long as the collection method didn’t create a lot of additional work unnecessarily.

Mr. Joyce asked about the cost recovery for parks and recreation fees and public works fees. Mr. Coleman responded that they do not have 100 percent cost recovery. He said that the goal for parks and recreation fees is that they cover the direct cost of the program. The public subsidy is the cost of the facilities and some indirect costs. He said that the goal for cost recovery for trash is 85 percent although this year it has been in the 60s. 

Mr. Joyce asked about fees in general paying 100 percent cost recovery. Mr. Coleman stated that there are fees for various things and the goal is to get as close to 100 percent cost recovery as possible; however, that generally isn’t done on a year-to-year basis due to the difficulty in predicting the variation. He said that if the units of costs could be estimated then it could be done for an exact amount. Parks and recreation fees and solid waste fees are all based on different policy decisions by different councils at different times. He said that staff recently reviewed those fees and established that the percentages of the user fees do not pay 100 percent of the costs.

Mr. Roseland stated that the skate park and dog park have higher levels of cost recovery than the enforcement program for grading fees.

Mr. Joyce said that subsidized fees are not revenue generators and growth is a revenue generator which helps finance other subsidies. He said that in raising the grading fees it appears that development in general is being punished because all fees are going toward the affordability of housing.

Mr. Ross Massey of Chas H. Sells, Inc. stated that given his experience working in Cary since 1993 the Town is currently looking at a large amount of development.  He understands the interest to recover costs and suggested looking at a three year moving average so that the potential exists for the fee to come back down should the activity continue. He said it would help provide fairness and expectations matched to the level of development.

Mr. Hunter stated that the development community is supportive of the Town of Cary . However, from a goal perspective, every time there is a fee increase there is an accumulative impact and it is not just the fee. He said that the end user is paying financing costs, Cary ’s costs, and commissions. He said that when adding everything up something will suffer, either the quality to pay for the additional fees or the cost to the buyer is going to be greater. He requested that council look at the bigger picture, consider looking at a 1 to 3 year period, and then revisit the issue so that the impact is not as great and much more equitable.

Mr. Don Belk of John R. McAdams Company, Inc said that grading activities are minimized by developers to the extent possible to save costs. He doesn’t believe that an increase in fees would necessarily result in less grading because it is already minimized to the greatest extent possible.

Mayor McAlister thanked the group for allowing council to participate in their meeting. He said that council will be better prepared to make a decision with the information provided.

Mayor McAlister adjourned the meeting at 10:10 a.m.