Sumner City Council reviews development-permit fee study proposing moves toward full cost recovery

At a June 8 study session, Sumner City Council heard a consultant present a development services cost-of-fee study showing the city currently recovers roughly 75% of permit-related costs and exploring options to reach full cost recovery.

Consultant Shiovani Lal of FCS Group told the council the analysis used five years of permit history and staff time estimates to compute direct, indirect and overhead costs. The study estimated an annual department cost of about $2.647 million, of which roughly $1.545 million (about 58%) is recoverable through development-services fees; current fee revenue was reported at a little over $1.1 million.

The report calculated a department-level full-cost hourly rate of about $157.38, a figure the consultant contrasted with the city27s current charging rate of about $49.50. Shiovani presented three policy scenarios: a modest increase (tier one), a mid-level increase (tier two) and a full-cost scenario (tier three), approximating 10%, 20% and 30% increases for commonly charged fees; staff estimated the higher-tier adjustments could yield roughly $350,000 in additional annual revenue.

Why it matters: the shortfall means the general fund covers some development-services work now. Staff and the consultant said moving to an enterprise fund would increase transparency (showing fees and related costs per project), allow the city to build reserves to weather down years, and align payment responsibility with users of the service rather than broad tax-base subsidies.

Council discussion focused on distributional effects and policy choices. Several council members urged care to avoid unduly burdening residents or small businesses; one council member suggested avoiding increases on small residential work (bathroom remodels, accessory dwelling units) while leaning heavier on commercial development fees. Staff noted impact fees and SDCs (parks, traffic, schools, fire and utility SDCs) are not part of this study and remain the major cost drivers that most often affect project feasibility.

Shiovani emphasized legal constraints in setting user fees: the city may recover full cost for the development services division, but arbitrarily raising commercial fees to subsidize residential fees would mean the division as a whole is not at full cost. Staff recommended council consider policy choices (which customer classes to raise and how) and return with modeled scenarios.

"For this analysis we looked at five years of permit history and built cost layers for direct, indirect and overhead," Shiovani said. "The department27s current cost recovery is roughly 75 percent; the gap to 100 percent is what these fee-setting scenarios aim to address." (Shiovani Lal, FCS Group)

Staff recommended that if the council wants to proceed toward an enterprise fund, the city can phase the change and use the consultant27s deliverable (model, user guide and training) to update rates internally; the consultant recommended periodic reviews every three to five years rather than waiting decades.

The council did not adopt fee changes at the meeting. Members asked staff to return with scenario modeling that narrows options (for example, targeted commercial increases versus across-the-board adjustments), equity analyses for small businesses, and proposed language and timing for any move to an enterprise fund. Staff proposed referral to the Community Development committee and a follow-up study session in July to present refined scenarios.

The study and the council27s direction do not change impact fee or SDC calculations; those remain governed by separate statutes and previous rate-setting processes.

What27s next: staff will provide scenario modeling and a recommended path for council consideration at a future study session; no ordinance or fee change was approved on June 8.