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Los Altos Hills council adopts fee changes to close budget gap, preserves ADU incentives
Summary
After hours of public comment and debate, the council adopted a new fee policy tied to a cost‑allocation study; staff will implement higher recovery for larger projects while keeping reduced fees for ADUs and incentivizing heat‑pump electrification.
Los Altos Hills — The Town Council on Thursday adopted revisions to the town’s user‑fee schedule and directed staff to fold those changes into the FY2026‑27 budget after an extensive public review and debate.
Staff presented a cost‑allocation and user‑fee study from consultant NBS showing the town’s overall cost‑recovery across permitting and planning activities lagged the true cost of services. The consultant offered three scenarios (80%, 90% and 100% cost recovery) and staff recommended a mix that would keep incentives for accessory dwelling units (ADUs) while improving overall revenue stability.
Council members focused on two tensions: the town’s desire to recover a greater share of planning and building costs so the general fund is not subsidizing permitting, and a policy goal to encourage ADUs and electrification measures such as heat‑pump water heaters. After hearing residents, contractors and the Finance & Investment Committee, council approved a mix of targets that raises recovery on larger projects while retaining reduced fees for ADUs and a subsidy for certain electrification permits. The council also directed staff to review the plan‑check formula for small projects — such as modest bathroom remodels — where attendees said plan‑check fees could become disproportionately expensive.
Mayor Rajeev Bateja noted the changes were part of balancing a continuing high‑cost environment: "Small percentage changes in cost‑recovery produce large revenue impacts," he said during the budget discussion. Staff said each 10‑point change in recovery could represent roughly $340,000 in revenue swing for the general fund.
The council voted to adopt the broader FY2026‑27 operating budget and five‑year capital plan subject to the fee schedule changes. Staff said the adopted package preserves a modest operating surplus and funds new staffing additions included in the budget — notably a principal planner and a code‑enforcement officer — while leaving scope to revisit small‑project plan checks later this year.
The council asked staff to return with concrete language and implementation steps and to re‑examine small‑project and plan‑check fees for equity and proportionality. The new fees and budget take effect with the fiscal year starting July 1, 2026.
