Fee study reveals large gaps in cost recovery; council sends study to FIC and directs modest subsidies

Los Altos Hills — A consultant presentation and lengthy council discussion on May 14 showed the town currently recovers roughly 43% of the full cost of planning, building and engineering services, and recommended a tiered fee model and blended hourly rates that would increase revenue toward full cost recovery.

Nicole Chism of NBS presented the study approach, the cost‑allocation plan and a model that translates estimated staff time into fully‑burdened hourly rates (north of $300/hour) and per‑permit fees. The consultant showed examples in which lower‑value permits would become more expensive under the proposed tiering, while some very large projects could show lower permit fees than under the town’s previous flat percentage. Staff said the changes reflect a combination of increased overhead allocated to fee programs, higher hourly rates and a recalibration of hours required for different permit tiers.

Several councilmembers and many residents expressed surprise at the size and shape of the changes and asked for arithmetic examples showing how the analysis works for an ADU, a small remodel and a multi‑million dollar home. The council directed staff to return the item to the Finance & Investment Committee for a detailed review and asked consultants to provide line‑by‑line worked examples. Council also gave staff general policy direction to subsidize electrification/ADU/HVAC/water‑heater permits at 20% (staff said the current budget could absorb an estimated $100,000–$200,000 subsidy for ADU incentives if council chooses to do so).

No fee ordinance was adopted at the meeting; staff will bring clarifying materials and proposed fee schedules back after FIC review.