City adjusts engineering fees for development process

City staff has been working for the last several years on revamping the development review process in an effort to streamline the process and make it more predictable.

Last week, City Commissioners approved new engineering fee structures as a part of that revamped process.

The first group of fees is for land development engineering review and other work done by engineers in the city’s Planning and Community Development Department.

The other set of fees is for the engineering division of the Public Works Department.

During the meeting, Brett Doney of the Great Falls Development Authority spoke in favor of the change and said, “we think the city has made it more predictable and flow better.”

He said developers want certainly and speed and while there will never be a fee system that will please everyone, this was a step forward and GFDA was in support.

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Spencer Woith, a local developer and engineer, said that they asked for predictability and supported the changes.

“Staff has been great to work with in finding solutions,” he said.

His only concern was the data being used for the fee formula since over the last two years with the changed development process, they’d seen “dramatic increases with the efficiency of our place being reviewed” so he asked that the city review and update the data over time as the process improves.

Sherrie Arrey of NeighborWorks Great Falls said that she was mostly supportive of the changes but concerned that the fees don’t level off enough for development projects in the millions.

She also suggested that the data for the fee formula be reviewed and updated over time, but “I think you’re on the absolute right track.”

Craig Raymond, city planning director, said that it’s a dynamic process and that they’d continue to review the formula.

Staff have been working on revising this fee structure for several years as they revamped the development review process and shifted plan review, construction oversight and project management duties from the engineering division of the public works department to the city planning department.

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“Many development projects in Great Falls require the installation of public infrastructure and/or other facilities that are not covered by other building permit review processes such as the construction of new public streets, on-site stormwater treatment and retention/detention systems and water and/or sanitary sewer service lines. A new fee proposal has been developed that provides a fair, transparent and predictable methodology to cover costs associated with development review and engineer construction oversight activities,” according to the city staff report.

In shifting some engineering staff to the planning department, the city is using a different funding strategy to fund those positions as well as the related operational costs.

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During discussions about restructuring the development review process, frustration regarding how and when infrastructure permit review and inspection fees were charged was expressed by the development community. At the time, the fee system in place was based on charging hourly.

That frustration, according to city staff, focused on:

  • the inability of City staff to determine the total billing cost for development projects prior to their completion,
  • inconsistent billing periods and
  • a lack of detail and transparency on the invoices to itemize what work had been completed during that billing period. The requested outcome was a fee process that was fair, predictable, consistent and transparent.

City staff looked at multiple options to address the concerns and initially proposed a flat percentage based on total construction cost of the public infrastructure being built under the permit, according to the staff report.

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Several years ago, staff also created a development community working group “with broad but targeted experienced representation that included developers, engineers, architects and commercial builders,” according to the staff report.

The group, as best staff can recall, included: Spencer Woith, Gary Knudson, Shawna Rothwell, Leanne Bailey, Ken Cox, Joe Murphy, Nate Young, Dale Nelson, Tim Murphy, Brad Talcott, Jake Neil and Shawn Arthur.

That group did not support the flat percentage fee proposal but there wasn’t clear consensus on an acceptable option, according to staff.

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“It became apparent to staff that different members of the group had differing priorities and different viewpoints on what was the fairest system. It’s probable that each viewpoint could have been based on that individual’s typical development scale and scope, their role in the development process and past experience with the city review and permitting process, according to the staff report.

During those discussions, a hybrid proposal started to develop as did a sliding scale plan review fee.

The hybrid plan uses the three basic elements of the subdivision and infrastructure review process; plan review, engineer construction oversight and construction inspection services. The sliding scale fee is intended to pay for the plan review and engineer construction oversight process, according to city staff, and construction inspection services are proposed to be billed monthly on an hourly basis for inspect-able work during construction.

“Coincidentally, a sliding scale is the same basic method that traditional building permits have been charged for at least 20 years and has largely been accepted as a fair, predictable and transparent system,” according to the staff report.

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The hourly rate is for construction management services and other unanticipated miscellaneous billable activities.

The new plan review fee was developed by city staff through research of public infrastructure costs from 15 development projects that were constructed in Great Falls over the the past decade. Staff plotted those costs on a graph in comparison to the actual billed costs of city staff time that were necessary to review those projects. That comparison allowed a trend curve to be developed and a fair billing formula to be established based on that trend curve, which is the fee = 3.3182 x ((Infrastructure Cost)^0.6593).

Examples of how the proposed billing formula works, per city staff, are:

  • Project 1 – Public Improvements for the Thaniel Addition
    • Total Cost of Installed Public Infrastructure – $1,810,550
    • Application of the Proposed Plan Review Billing Fee – $44,327.89
    • Cost of the Plan Review Fee as a percentage of Project – 2.45 percent
  • Project 2 – Public Improvements for the Eagle Jet Hangar Project
    • Total Cost of Installed Public Infrastructure – $95,000
    • Application of the Proposed Plan Review Billing Fee – $6,349.15
    • Cost of the Plan Review as a percentage of the Project – 6.68 percent

According to city staff, the sliding scale fee reduces the plan review fee percentage slightly for larger projects; compensates staff fairly for review time; and can be calculated upfront for developers to better understand this particular fee when developing project budgets.

“Despite which method is ultimately selected as the adopted fee, time and monitoring will be required to determine if this new fee and process ultimately achieves the original goals and meets the budget parameters,” according to the staff report.

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The total cost for two development review engineers in the current budget is $228,761.

Revenues that fund those positions are: plan review and construction oversight fees which are anticipated to equal about half of the revenue projections at $110,364; other permit revenue is projected to be $17,975; the Building Safety Division Fund contribution is proposed to be $50,000 annually and city project management is budgeted at $50,422, according to the staff report.

Fees for the engineering division of the public works department were also adjusted.

Through internal and public discussions, staff determined to continue with the traditional method of charging by the hour for privately installed infrastructure.

The engineering division inspects construction for privately installed infrastructure that will be dedicated to the city as part of a subdivision or other development. That typically includes the installation of streets, water mains, sanitary sewer mains and storm drains. Engineering also inspects sidewalks, driveways, curb cuts, fire lines and sanitary sewer service installation and repairs.

The inspection of privately installed infrastructure was originally approved by commissioners in 2003.

The last adjustment to engineering fees was in 2014 and the new fees are:

“Inflation and fixed or drastically reduced General Fund reimbursement of unrecovered costs dictate that fees must be adjusted to cover costs. While it should be noted that revenues from construction inspection decreased during the 2008 recession, activity has rebounded to pre-recession levels. It is uncertain at this point how the ongoing global pandemic will affect new development and city growth in the future; however, initial indications are that inflation is rising and much more rapidly, along with increased workload, creating some urgency to adjust these fees now,” according to the staff report. “Approving these fees will allow the city to curve its costs, while providing a service critical
to reliable infrastructure that is required by the Department of Environmental Quality and at a cost to the contractor that is less than that of a third party hired to perform the same service.”