By Elizabeth Cloutman

Los Altos Hills

Los Altos Hills is scheduled to change the way it calculates building permit fees this week following a recent study indicating that the current fees could be in violation of state law.

The Los Altos Hills City Council expected to approve an interim proposal on how to calculate the cost of building permit fees to more accurately reflect actual costs after the 2002-03 town budget is adopted Thursday.

Since 1994, the town has charged $90 per square foot. According to state law, a city may not charge more than its estimated reasonable cost for building permits. Council members said the town’s current charges may be in excess of actual staff costs and thus in violation of state law.

An analysis by Maximus Inc., a private consulting firm that serves governmental agencies, showed that the town’s current building permit charges resulted in annual excess fees in some areas and deficits in others.

For example, the average annual excess charges for new residence permits over cost of service is $296, 616.

In contrast, the permit charges for interior remodeling yielded an average annual deficit of $86,457.

Sarah Joiner, the town’s administrative services director, noted in a May 16 staff report that one standard practice of determining direct hourly personnel costs is to divide annual staff salary and benefits by the number of hours available to work during a year.

The hourly direct rate is then doubled to recover both direct and indirect costs.

However, Joiner noted that this method of calculating permit fees “may not yield the best results.” She thinks the fee must take into account both the direct and indirect expenses of providing the service. The use of the town-owned car is an example of a direct cost. Indirect costs include expenses such as staff salaries, building maintenance and reserves for equipment replacement. Once direct and indirect costs are determined, the staff can develop a per-hour or per-unit cost.

“I feel I would rather do a more thorough study and have accurate figures,” Joiner told the council May 16. “I’d like to see cost based on actual hours.”

Mayor Toni Casey emphasized the importance of complying with state mandates on building permit fees as soon as possible.

“Until Sarah can get the new process in place, we may have to use (the information we have now) to do right by our residents,” Casey said.