Planning Fees Will Switch to Hourly

Developers in April will begin paying for building permits and inspections in Orange County based on the time county employees spend on the job, instead of a flat fee.

The new system, which received final approval from county supervisors Tuesday, makes Orange County the second county in the state to charge home and commercial builders for actual employee time and materials. The hourly rates will range from about $78 to $132.

Under the old system, developers paid a flat fee for checking plans and conducting inspections based on the expected value of the building. The new system was developed after one home builder, Barratt American, sued the county, arguing that the flat fees far exceeded the county’s costs of doing the work.

Moving to a time-and-materials method led to substantially lower fees in Riverside County, which pioneered the billing method in the late 1990s. Officials there said the county and developers saved money by better managing their staffs.

Officials with the local chapter of the Building Industry Assn. cautiously support the new formula. They reiterated a request Tuesday for the county to justify a 212% surcharge, based on the inspector’s hourly rate, to cover overhead costs of administration and training. Overhead was covered by the flat fee under the old system.

It’s unclear how much builders may save under the new formula, which will take getting used to for both sides, officials said. It calls for developers to pay a deposit -- an amount higher than the existing fees -- that will be drawn down as costs are incurred. Deposits will vary based on the type of service. For example, developers must place a $2,335 deposit with the county to process a 2,000-square-foot model home in O.C. That represents a 64% increase over the current fee. But at the end of a job, a builder will get back what remains in the account.

Supervisors have promised to reduce the deposit amounts within six months if they prove to be too high.

Officials said the new system is critical to revamping the county’s Planning and Development Services Department. The agency is accruing monthly deficits averaging $500,000 because the cost of staffing the department has outstripped the agency’s revenue. In January, officials eliminated 39 of the department’s 204 positions.

The county, meanwhile, is defending itself in the Barratt lawsuit over its old fee formula and for having collected and spent $18.5 million in fees that were allegedly overpaid by developers. The suit argues that state law requires developers to pay the county only for the cost incurred.

Retired Palm Springs developer Dick McCarthy, who filed the suit with Barratt, has said he’ll ask the Superior Court to review the new deposit amounts.