City Council - Special Meeting

Thank you.

So. Thank you. .

I start and then I look at it. All right, I'd like to call to order the special study session of June 29th, 2026 at 6 p.m. All council members are present and I'd like to just say if you need to use a restroom, please reach out to staff and staff and they'll get you to a facility to use. All right. Okay. So with that said, we'll get right into the study session business. Our first item, number one, development service fee update. So I'd like to call on Jason Wilson.

Thank you, Mayor. I'll just wait a moment for our presentation to come up. While Jeff's pulling that up, I'll let you know this is the topic that we discussed about two weeks ago. Council wanted some additional information before they were comfortable moving forward. So we are here tonight to answer some of those questions, give you a little recap, and then look for some direction here at the end. So once again, today's desired outcome is we have one policy question that we need direction on. We actually have two, but we'll start with this one. So the first policy question we're looking for some direction on is do you want to subsidize applicant permit fee costs? And if so, you want to do it uniformly or by applicant type? So to help council kind of work through this, we created a little decision tree here. And really the question, like I said at hand, is do you want to subsidize any permit applicants? As a reminder, our current model, we don't do 100% cost recovery. We actually subsidize on average about 25% of all of our permit applicant types. So that means that, you know, one person may not be paying, they might be getting a permit, let's say, to build a home. They are not being charged full cost recovery and the general fund subsidized that. We'll get into that in just a minute. So if you don't want to subsidize any permit applicants, then the staff's recommendation still stands. That is to increase the permit fees by 30% across the board. If you do want to continue subsidizing permit applicants, then you really have three choices. Do you want to subsidize all types and by how much and how much percentage? Like I said, we're 25 percent today, so it could be continuing that 25 percent or it could be as little as 5 percent. And then same thing with subsidizing residential and commercial. You could just choose to not subsidize that or you could choose to subsidize one or both of those. So when we talk about subsidy, where does it come from? Just as a reminder that when development services charges a permit fee, it covers the cost of the employees that help manage that permit and approve it and review that permit. It doesn't cover all their costs, just their costs related to permit review. And that is currently their salaries and benefits and associated costs are paid for by permit revenue and then backfilled with any topped off with any general fund revenue. And as you all know, General Fund pays for those valued services that our community definitely needs and desires, and that's police, parks, courts, and other street improvements and other things that council prioritizes. So another way of looking at it is improving your cost recovery in development services reduces the reliance on general fund support and helps ensure that taxpayer resources are available for the services that benefit the community as a whole, not necessarily an individual benefit like they get today with the subsidy. So we're going to turn it over to Shivani. She's back from FCS, and she'll go through the next series of slides.

Thank you. Good afternoon, Mayor, council members. So yeah, thank you for the opportunity again and just coming back with some information specifically based on the directions we received at the last presentation. So kind of anchoring ourselves, general development services and looking at The true north, as far as the Washington State RCW, we do have the opportunity to have a full cost recovery. Meaning direct costs, permitting costs, reasonable portion of indirect and overhead cost can be assessed or passed through as part of the fee, then that could be collected as a revenue to support that action. Can be assessed or passed through as part of the fee, then that could be collected as a revenue to support that action. What's not included are general government services such as long-range financial plan, code enforcement, any specific city policies that the city might have that's a greater good for the community itself that would be typically supported through general funds. LOOKING AT OUR RECOMMENDATIONS, SO THESE WERE THE POTENTIAL SCENARIOS. TIER 3 IS 30% ACROSS THE BOARD INCREASE WITH A FULL COST RECOVERY. CURRENTLY THE CITY IS RECOVERING AT 75%. BY DOING ACROSS THE BOARD INCREASE, IT'S ACROSS THE BOARD RESIDENTIAL, COMMERCIAL, AND IT'S COMING AS CLOSE TO FULL COST RECOVERY. So looking at a little landscape with residential and commercial, while we look at residential, per unit cost is higher on commercial and plays greater burden on commercial rather than residential. Between 2024 and 2025, most of our residential fees or revenues were generated through remodel, alterations, repairs, and those were the typical fees, re-roofing. AND MAJORITY OF THE ALL NEW CONSTRUCTIONS WERE THE COMMERCIAL FEES. THEY WERE ATTACKED WITH A HIGHER BUILDING VALUATION. WE STILL HAVE THE TARGET OF 30% ACROSS THE BOARD AND INCREASE CERTAIN FEES. SO HERE WE'LL HAVE A COUPLE OF EXAMPLES. SO FIRST ONE IS A COMMERCIAL PORTFOLIO, NEW WAREHOUSE, AND HERE WE'LL SPEND A LITTLE BIT OF TIME LOOKING AT THESE FOUR TABLES. SO ON THE FAR LEFT, YOU HAVE THE PORTFOLIO, YOU HAVE THE BUILDING PERMIT, OTHER DEVELOPMENT SERVICES FEES, PARKS, FIRE, TRAFFIC, SDCs, AND THAT'S A STANDARD BREAKDOWN OF CURRENTLY WHAT SUMMER IS ASSESSED. FOR A PORTFOLIO PROJECT. WITH A 10% IN A COMMERCIAL INCREASE, YOU'LL SEE THAT NUMBER INCREASE FROM 122,914 TO 135,205. AND THEN FOR OTHER DEVELOPMENT SERVICES, IT'S A LITTLE INCREASE OF $351. FIRE, PARKS, TRAFFIC, AND SDCs ARE HELD CONSTANT. IT'S NOT PART OF THIS ANALYSIS. AND IF YOU'RE LOOKING AT 20%, YOU CAN SEE THE INCREASE THERE IN THIRD TABLE, AND THEN THE FOURTH TABLE IS ACROSS THE BOARD. ONE THING OF NOTE IS LOOKING AT THE BOTTOM OVERALL INCREASE AT A 10%, YOU'RE LOOKING AT A 4.5, JUST SHY OF 5% INCREASE OVERALL IN THE FEE. A 20% INCREASE RESULTS IN OVERALL 9.9%, AND A 30% INCREASE RESULTS IN SHY OF 15% ACROSS THE BOARD IN PERMIT FEES. SO SIMILAR APPROACH, WE'LL TRANSITION INTO A TENANT IMPROVEMENT PORTFOLIO PROJECT. SO LOOKING AT NEW OFFICE SPACES, WAREHOUSES, CURRENTLY ON THE FAR LEFT, YOU SEE THE EXISTING TOTAL OF $74,511, WITH A 10% INCREASE IN FEE CATEGORIES. WE'RE LOOKING AT 75,873. IT'S A LITTLE UNDER 2% INCREASE, SO THAT INCREASES THE FEE OF $1,362, A 20% INCREASE 3.66%, AND A 30% INCREASE IS 5.48% ON THE GRAND SCHEME OF PERMIT. AND THAT WOULD JUST REALIZE THE REVENUE FROM CURRENT EXISTING 74,511 TO A 4,087 IF WE WERE TO CHOOSE THE 30% INCREASE. AND THEN LOOKING AT THE SIMILAR LENS, LOOKING AT 10%, 20%, AND 30%, AND ITS IMPACT ON OUR RESIDENTIAL PORTFOLIO, FOR A SINGLE NEW FAMILY RESIDENTIAL, CURRENTLY THE PERMIT FEES ARE AROUND 46,153. YOU HAVE THAT BREAKDOWN THERE WITH BUILDING PERMITS, OTHER DEVELOPMENT SERVICES, AND THEN THE 10% INCREASE, THAT INCREASES JUST SHY OF $1,400. SO THAT'S ABOUT 3.03%. A 20% INCREASE IS ABOUT TOTAL BUILDING FEES AS $2,799. IT'S A LITTLE OVER 6%. AND A 30% INCREASE WILL INCREASE THE PERMIT FEE BY $4,181. SO JUST A LITTLE OVER 9% ACROSS THE BOARD. SO THE NEXT SAMPLE SET WE HAVE IS RESIDENTIAL REMODEL. SO THIS IS A HOME BATHROOM REMODEL. SO CURRENTLY, IF A RESIDENT IS COMING IN FOR A BATHROOM REMODEL, WE'RE LOOKING AT A BUILDING PERMIT FEE OF $414.56 WITH THE $50 OF OTHER DEVELOPMENT SERVICES. A 10% INCREASE WILL INCREASE THAT FEE BY $45.81. A 20% WILL INCREASE THAT FEE BY $91.61. AND ACROSS THE BOARD WOULD BE $137.42. Thank you. AND ALSO LOOKING AT A GARAGE EXTENSION OR ADDITIONAL DWELLING UNIT. CURRENTLY, WITH THIS PACKAGE, IT DOES HAVE OTHER FEES AS WELL. WE'RE LOOKING AT $18,524 AS A FULL PACKAGE FEE, FOCUSING ON BUILDING PERMITS AND OTHER DEVELOPMENT SERVICES FEES. A 10% INCREASE, THAT INCREASE IS $538. AT 20%, THAT'S $1,076. AND AT 30%, IT'S $1,614.

SO THAT BRINGS US BACK DOWN TO THE POLICY DIRECTION THAT WE'RE NEEDING TONIGHT. AND THE QUESTION I HAD ONCE AGAIN IS DO YOU WANT TO SUBSIDIZE ANY PERMIT APPLICANT? SO I'LL LEAVE THIS UP AND TURN IT OVER TO YOU, MAYOR, FOR DISCUSSION.

THANK YOU. SO COUNCILMEMBER MALCOM, YOU HAVE A QUESTION, CORRECT? OKAY.

THE CHART YOU GAVE US, THE PARKS, FIRE AND TRAFFIC AND THE STC'S AND IMPACT B's, WE'RE SEEING ZERO INCREASE ON THOSE. DO THOSE GET INCREASED IN ANOTHER FASHION SOMEWHERE ELSE THAT WE WOULD BE VOTING ON IN SOME FUTURE THING? ARE THESE THINGS THAT ARE TREATED DIFFERENTLY? BECAUSE I THINK WE NEED TO THINK ABOUT ANY POTENTIAL INCREASES IN THOSE AREAS ALSO AT A LATER DATE POSSIBLY.

Yeah, you're absolutely correct. Those all have their own individual studies, and all of those have actually been adjusted in the last two years.

So do we have it on the docket to be adjusting those anytime soon?

Yeah, so your SDCs that are associated with utilities, they're evaluated with our biannual rate-setting process, so that'll happen next year. And then the parks and traffic impact fees are done AS PART OF THE COMPREHENSIVE PLAN, AND THOSE WERE JUST DONE. SO THOSE TAKE USUALLY 5 TO 10 YEAR MARK, WE LOOK AT THOSE AGAIN.

SO SOMETIME WITHIN THE NEXT TWO YEARS, WE MAY BE ADJUSTING THOSE FEES. YOU'LL BE LOOKING AT THE SDC FEES IN THE NEXT TWO YEARS? YEAH. OKAY. COOL.

THANK YOU.

OKAY. DEPUTY MAYOR ULFERS.

I JUST HAD A QUICK QUESTION. SO ON THAT BATHROOM REMODELING SLIDE, I WAS JUST CURIOUS, LIKE, WHAT SIZE? I MEAN, SO I GUESS I'M JUST TRYING TO FIGURE OUT THE PRETTY SMALL PERMIT FEE, BUT DID YOU HAVE AN AMOUNT OF, LIKE, HOW BIG IS THIS BATHROOM? BECAUSE I FEEL LIKE IT COULD BE $100,000, IT COULD BE $10,000, AND THE PERMIT FEE IS ALWAYS CONNECTED TO THE COST, ISN'T IT?

TYPICAL SIZE OF A RESTROOM IN OUR HOMES ARE MAYBE 200 SQUARE FEET, 300 SQUARE FEET. THEY'RE NOT...

SO RELATIVELY, FAIRLY SMALL.

FAIRLY SMALL.

NOT A HUGE PROJECT. CORRECT. GOT IT. ALL RIGHT.

THANK YOU. COUNCILMEMBER KENNA.

Hi, is there any way to look at, because we've got this decision tree and we're looking at residential and commercial and potentially doing different things in those areas, is there any way to game out what an effect would be if you did one of them, for example, across the board, but the other one you just did a subsidy, for example, like how much of that we're recouping and where that sets us in terms of recouping our... what we're providing as a service?

I'm going to try to answer this, and then Shivani's going to help if I don't get it right. So I think one of the challenging things with rate setting, I asked Shivani the exact same question actually last week, and then I asked her again today. You're really looking at historical data here. So we're looking at the 2024 data set and saying, okay, if we would have been charging fees that were 30% higher in 2024, what would that revenue difference be? And that's the 350%. So what's really difficult is going forward, how do you project what that new revenue is going to be? Our permits change a lot. I will tell you this. On the residential side, they make up a very, very small percentage of our overall permits. It's the bulk of the permits we've done in the last two years are either multifamily or they're commercial.

So maybe that's a perfect answer of what I was looking for. So maybe another way. of looking at this is if you went across the board for the 30% for a commercial, that would eat into much of what we are currently losing. The residential provides some of that, but just not as big of a chunk as the commercial.

Yeah, if you look at the revenue over the last couple years on what's residential and what's not, the mayor and I were looking at it. If you didn't go 30%, you're leaving somewhere between $30,000 and $50,000 a year probably on the board.

Okay.

Thank you. That's just historical data. Who knows what the future holds?

Anyone else? Oh, I saw a smile down there. Deputy Mayor Elfers. You didn't show up, Mark. I'm sorry.

Council Member Evers, did you want to talk first?

I'm just adjusting my microphone. I didn't press the button. Okay. I'll go after Deputy Mayor. Okay.

Thank you. My answer would be, I GUESS THE WAY YOU FRAMED IT WAS DIFFERENT THIS TIME, BUT I WOULD NOT LIKE TO SUBSIDIZE THE PERMITS AND JUST HAVE THE COST GO UP, BUT I WOULD LIKE TO KNOW, SO THAT'S MY DIRECTION ON THIS ITEM, JUST TO BE CLEAR. AND THEN SECONDLY, I WAS JUST CURIOUS, CAN YOU REMIND US WHEN WAS THIS LAST ADJUSTED AND WHAT ARE THE, YOU SAID THIS IS MOSTLY STAFF TIME, SO CAN YOU JUST EXPLAIN A LITTLE BIT, LIKE WHAT ARE THE COST INCREASES RELATED TO AND WHEN WAS THE LAST TIME WE ADJUSTED IT? I THINK YOU MIGHT HAVE MENTIONED IT LAST TIME.

PROBABLY OVER 20 YEARS AGO THAT THIS WAS EVEN LOOKED AT. Part of our process for individual staff was to have each one of them sit down and look at how much time it actually took for them to do each permit that they touch. And my job was to review that information with them and make sure that they accurately captured those hours based on each individual permit. So we feel, at least at this time, that there was a LARGE EFFORT TO MAKE SURE WE GOT IT RIGHT SINCE IT'S BEEN SO LONG.

AND THEN JUST, SORRY, ONE MORE FOLLOW-UP. I THINK YOU MENTIONED LAST TIME, THERE'S OTHER CITIES THAT DO THIS AS LIKE AN ENTERPRISE FUND AND THEY CAPTURE ALL THEIR COSTS. IS THERE OTHER CITIES NEARBY THAT DO THAT?

Correct. There is. So think of it as a user fee basis. So the services that's being provided, you're collecting. So the end user, the beneficiary is paying for the services rendered. City of Bellevue, a few other cities are doing enterprise funds. There are special revenue categories as well. So it becomes a policy decision of how much AND HOW THE STRUCTURE OF FINANCIAL STRUCTURE WOULD BE SET UP FOR A LOCAL GOVERNMENT. IF IT IS WITHIN GENERAL FUND, THEN YOU'RE LOOKING AT THE GENERAL FUND SUBSIDY AND HAVING THAT CLEAR NEXUS OF WHAT IS THE COST, WHAT IS THE PERMIT REVENUE, AND HOW MUCH IS THE SUPPORT THE GENERAL FUND IS GIVING. SO HAVING AN ENTERPRISE FUND ISOLATES THE DEVELOPMENT SERVICES AND IT STAYS WITHIN AS A WHOLE, AND YOU COULD SEE WHAT THE PERMIT COST, THE COST OF OPERATING AND COST OF REVENUE GENERATION

OKAY. AND THEN ANOTHER FOLLOW-UP. SO PART OF THE BUDGET, THIS IS A LITTLE BIT OF AN ASIDE, A LITTLE BIT LIKE THE STC QUESTION, BUT SO AS FAR AS LIKE PERMIT COSTS, WE JUST DID THE AWC CONFERENCE AND ONE OF THE THINGS THEY SHOW IS, HEY, THE COST OF BUILDING IS INCREASED LIKE $40,000 OR SOME BIG NUMBER, LIKE $40,000 TO $70,000 PER HOUSE, YOU KNOW, I THINK IT WAS CLOSER TO $40,000. I THINK JUST FROM FEE INCREASES FROM CITIES AND STUFF LIKE THAT. SO OBVIOUSLY THOSE COSTS ARE GOING UP NOT JUST RELATED TO THE BUILDING PERMIT PORTION, WHICH WE'RE BEHIND ON INCREASING, BUT THEY'RE ALSO GOING UP A LOT. IS THERE ANYTHING AS PART OF THIS PROCESS, A SEPARATE PART OF THE PROCESS OF KEEPING THOSE PERMIT FEES DOWN IN THE FUTURE AS PART OF THE BUDGET CYCLE THAT WE'RE GOING THROUGH?

So Deputy Mayor Alford, it's like I explained earlier, all the other fees here have their own studies. And the only one that you'll look at in the next two years is the SDCs and impact fees related to utilities.

Right, and I'm not asking about those. I'm asking about is there a way to keep the building permit fees down in the future? I'm trying to just understand what the cost is. They're connected to mostly hours, which is mostly wages, which is mostly going up, I assume.

So part of the construction cost, you have the hard cost, the construction cost, and then you have the salaries and benefit cost. Retaining talent, retaining those professionals, planners, inspectors, the entire, the capacity from start to finish, and with contract negotiations, so the cost of having talent has gone up. Unless that stops in our region, it's hard to say it's going to decrease or stay constant.

And some of the complexity, if there's more policies and things that they're reviewing, it takes more time. So the hourly rate has gone up and the number of things they have to review has gone up. Those are the two big drivers.

If there's more requirements through SEPA, through NEPA, and both state requirements, federal requirements comes in place and Doug can talk to it. The time spent on that takes longer.

Time is money.

That's what I thought. Thank you.

All right, Council Member Evers. Okay, now you turned yourself off.

Let's try it again.

We'll try it once more. There we go.

I was going to say I would be in favor of 30% across the board. I understand we subsidize the cemetery and parks and that, but I don't think we should be getting our full money out of this, and that's money that can be used elsewhere.

Thank you. Council Member Kenna.

Just two maybe clarifying questions, then I can share my thoughts. But I think from our first discussion, I wasn't perfectly clear, and I think I am after this presentation, but I just want to make sure that we can do different things for residential and commercial. Okay, so we can keep on constant while we raise the other one or whatever that looks like. Do any of you at the table have any idea if we did raise commercial 30%, for example, how much that may deter new development coming in and new opportunities? As Deputy Mayor Elfers explained, costs are going up everywhere. We want to be a welcoming place for the business community, but they also need to carry their fair share of the burden. So do you have any sense for developers coming in and what they're sharing about costs rising like that?

I have yet to have a conversation with any developer on that personally. My gut is telling me that obviously they're looking for the cheapest place that they can develop and the most practical for them. THE ONE THING THAT THE CITY IS PROUD OF IS THE FACT THAT OUR REVIEW TIMES ARE MUCH LESS THAN MOST PEOPLE IN OUR AREAS, WHICH IS TIME AND MONEY AGAIN. SO WE DO A REALLY GOOD JOB OF BEING EFFICIENT IN THAT INFORMATION THAT WE PROVIDE QUICKLY, IT'S RELIABLE. SO WE WORKED REALLY HARD OVER THE LAST SIX, SEVEN YEARS WHEN WE HAVE FORMED THIS GROUP TO GIVE THOSE TANGIBLE BENEFITS TO THE DEVELOPER. THERE'S A LOT AS, Deputy Mayor Elford knows when it comes to submitting plans and getting projects in and timely and turnaround, there's a lot of money and effort that sits there waiting for a response, and we do a really good job of that.

Sure. Okay. So, yeah, knowing that, and that's great context, Doug, I think, you know, we haven't done this for 20 years, and I said this last time, I made a joke of it, but it's a truth that, like, we may not do this for 20 more years or longer. So, you know, we've, for lack of a better word, let people off of the hook. You know, we haven't raised those rates to keep up with the services we provide, and as you've explained, Doug, we do provide a service and a good service at that. So I'm in favor of looking at commercial, increasing that by the 30%. I do think that that plays some catch up and gets us mostly all the way there in terms of making us whole. We're speculating a little bit about what a given year might look like, I would like to see us ease the burden on residential to some extent. I haven't quite settled on... I don't know how fine-tooth we can get about that, but I would like to see us just not place the full burden of the 30% on residents and their... Even though it is a fairly minor expense if you're remodeling a bathroom or an ADU or those types of things, it's just more... It's not a financial decision in my mind. It's more... Just a decision from what we hear from people and expenses and costs going up and how can we do that? How can we take a decision as a council where one opportunity we have to lessen the burden on people? That's just where I'm coming from. I do respect any other opinions. But I do think that knowing commercial gets us mostly there in terms of making up the difference gives me some peace of mind there.

Well, can I just add something here? So to me, I think what I'm hearing you say, it's kind of like if I asked you to pay my power bill. Would you be willing to do that? Because I can't afford my power bill. So why would I want to pay for your bathroom remodel? I mean, I'm sorry. That's just kind of the comparison. I am working closely with a lot of the developers, and what brings people into this town is the service we provide on the front end and the timeliness, which keeps their costs down. We have two major things going on in town right now. So I think that I hear you about keeping costs down for people, but somehow we have to pay for it. Now, we don't have a lot of new single-home development. We really don't have a lot of land for that. So it really, to me, it needs to kind of be in the remodel aspect. But you just did a remodel, right? I've done a major remodel. I'm sure other people in here have done remodels. So for the homeowner, when I was looking at that, can you go to that chart, please? I'm just giving you my two cents because I get to. And so when you look at that, we're talking a difference of $137.42. I wouldn't remodel my house if that stopped me from doing it. Right? So, I mean, it's something to consider when we look at the overall balance. And so I think businesses right now, when I talk with them, we talk across the board. And so they know if they're coming in to do a change of use or a major remodel on a building here in town, they know up front. We're in deep discussions with at least one right now. And so I understand what you're saying. I don't know how we're going to be able to control the cost of living for people, but this is going to touch maybe... I don't know. We're trying to look in the future, and when we looked backwards, how many remodels did we do? How many home remodels? I know I was a big one. I did a $1.3 million remodel.

So as of from the first of the year to June 8th, we had three new construction homes. We had two additions, five alteration remodel repairs. So today in this category of residential, we've had a total of

15 permits issue So it's something to think about you know I mean I hear what you're saying I'd like to figure out ways to reduce all kinds of costs compared to during that same time We've had 30 commercial building industrial permits issue Just my food for thought okay, I'm gonna move on councilmember, Wilsey I

So, quick question, and for those who don't, I'm not always familiar with some of these charts. The portfolio increase from Dev, what is that percentage? The bottom, at the very, very bottom.

So that is the development fee service increase. So that's the 10%, 20%, and 30%.

Gotcha. So why is it that the residentials are paying the full 10% versus some of those larger commercial, like the new warehouse, is only paying less than half? Even at 30%, they're paying less than half. Like this is a single-family home, but if you go back to the new warehouse one...

It's because you're looking at a tenant improvement versus new construction. Gotcha, gotcha. And when you look at new construction, you have the SDCs and impact fees. Okay. That are changing that bottom dollar.

Gotcha, gotcha, gotcha. Okay, that's what I was trying to figure out why, where the, yeah.

It's of the total project.

Yeah, it's of the total project.

Gotcha, gotcha, okay.

Yeah. So another way of looking at that on a new single family residential, Even if you increase it by 30 percent, it's not a 30 percent cost for all permits. MS. Right. It's only a 9 percent. It really ends up being a 9 percent lift. MS.

That's why I was trying to figure that out. It's a great question. Yeah, where that lays. Okay. I'm for the 30% increase, but I'm kind of along the lines of if we can keep some sort of carrot on a stick for commercial, that would be my recommendation. I don't know. I mean, increasing at 30% and then still taking 25% off of that increase, You're kind of discounting your own, you know, cost increase. But if there's a 15% or a 10% that would be worth, you know, commercials, you know, time and energy to even, you know, sometimes the discount is so low it's, you know, inconsequential and doesn't matter to people. But when you're looking at commercial, I've known plenty of businesses that have not been able to develop here because, you You know, the permitting isn't, you know, really, then they have to go in and get permission to fix up a building to make it what they are. And it's not even a change of use. It's just renovations. So anyway, if there's a possibility to, you know, consider a carrot for commercial, that's kind of where I'm leaning.

Well, one thing I would want to add to that in this discussion, what we've I PERSONALLY HAVE RECENTLY DISCOVERED IS WHEN WE GET WIND OF SOMEBODY WANTING TO DO BUSINESS, IF THEY COME IN AND TALK TO OUR DEVELOPMENT SERVICES GROUP, THEY ACTUALLY CAN REALLY HELP THESE BUSINESSES SAVE MONEY. WHAT'S BEEN HAPPENING, I'LL JUST KIND OF THROW OUT THE PROCESS, WHAT I'VE BEEN ABLE TO ASSERT TO POINT IS A NUMBER OF PEOPLE HAVE A PASSION, THEY WANT TO DO SOMETHING. AND ALL OF A SUDDEN THEY WANT TO DO FOOD TRUCKS, THEY WANT TO DO A COMMERCIAL KITCHEN, THEY WANT TO HAVE A COFFEE SHOP IN THE FRONT, THEY THINK THEY MIGHT WANT TO DO SOME REAL RETAIL SPACE. I MEAN, THIS IS A REAL LIVE EXAMPLE WHERE WE JUST TALKED WITH SOMEBODY, AND SO THEY GOT ALL UP IN ARMS ABOUT THE COST, BUT THEY NEVER CAME INTO THE CITY TO SEE WHAT THE PROCESS WOULD BE TO DO EACH OF THESE. AND IN SOME INSTANCES, YOU GET A TRIANGULATION, AND I HOPE I'M, I WANT TO BE NICE. A triangulation of designers and architects that say, oh, you need this. When in fact, if they came to the city, they would learn instead of the $60,000 grease trap, they can do a $25,000 grease trap. Instead of the $150,000 elevator, you can do the $50,000 elevator. And so that's where I think when you use the word carrot for the developers, that's why I'm getting out there and finding them and we're coming in around the table. And I think that service we provide really is the carrot because now we can walk people through the precedent of the steps they need to do and the cost that it takes to do it. It's more than just those costs. There's a whole process that we're implementing that the city has always offered and done.

okay sometimes people just by nature would rather instead of this so much rather them come into the city early prior yes it just doesn't happen all the time we offer it up to everybody please do a pre-op it's free come in and talk to us oh no we got it we have a good architect okay you know I mean it's they just don't take advantage of it that's why we have three major businesses coming into this town and they're all very happy

So, all right, Councilmember Malcolm. Were you done? I'm sorry. Okay, thank you. Thank you, Mayor.

One, I mean, I agree with the, you know, it's actually 15%, I think, is the total for the commercial. You know, is that going to be a detriment to people wanting to come to the city and build here? But I also have a point of view around you know, the residential, you know, specifically the residential remodel and the ADU. One, ADU promotes infill, which is something the whole state, the county, we're all trying to get done in making that easier. And I know that the total amount on that is only, what's it, 8.71% increase. And that feels to me it's like whatever we can do to make that easier for people, I'm pretty much all for. And the remodel, I feel like, again, it's a small number. but we're saying 30%, so if that number jumped up, you know, that would be a fair amount of people getting hit with that. So I feel like those are kind of carrots for the people that live here, because when something goes on in the warehouse district, that's a commercial effort coming in. It's usually non-citizens. It usually has impact on quality of life, meaning more traffic and noise and things going on. So I kind of feel like with commercial, and also they're in it for a profit. They're in it to, you know, they're going to add up all these fees and costs and everything, and they're going to charge their product in a way that will, you know, COMPENSATE THEM BACK. SO I LOOK AT THAT THINKING THAT THE RESIDENTIAL SIDE DOESN'T HAVE A LOT OF ABILITY TO KIND OF, I GUESS, COLLECT THOSE COSTS AGAIN WHEN THEY'RE DOING THEIR BATHROOM OR ADDING THE ADU FOR THEIR PARENTS OR WHATNOT, WHERE COMMERCIAL HAS A LOT MORE CAPACITY TO SOMEHOW RECOUP THOSE COSTS IN SOME WAY, SHAPE, OR FORM. PRO-BUSINESS AS HECK, AND I FEEL LIKE IT'S STRONG. SO I'M IN THIS WEIRD SPOT GOING, GOSH, I REALLY WANT TO MAKE IT EASIER FOR THE RESIDENTS AND THE CITIZEN, BUT I ALSO DON'T WANT TO DETER ANY OF THE COMMERCIAL STUFF. SO I'M LOOKING FOR SOME SORT OF GUIDANCE, EITHER HERE ON THE COUNCIL OR FROM YOU GUYS, TO SAY, OKAY, I HEAR WHAT YOU'RE SAYING, MARK. HOW DO WE BALANCE THIS SO THAT THE RESIDENTS GET SOME SORT OF SOMETHING OUT OF THIS AND THAT WE DON'T BURDEN THE COMMERCIAL END TOO MUCH? AND I DO APPRECIATE THE CHARTS. THIS IS SO HELPFUL. THIS IS KIND OF WHAT I WAS LOOKING FOR LAST SUMMER WHEN WE WERE GOING THROUGH THIS REALLY DOES HELP IT. BUT AT THE END OF THE DAY, THE COMMERCIAL ACTIVITIES ARE ABOUT BUILDING SOMETHING THAT THEY'LL MAKE MONEY ON AND MAKE A PROFIT ON, AND THAT'S A LITTLE BIT OF A DIFFERENT MOTIVATOR THAN, SAY, SOMEONE WHO'S REMODELING THEIR BATHROOM OR ADDING AN ADU FOR THEIR PARENTS. AND I FEEL LIKE WE NEED TO THINK ABOUT THOSE TWO THINGS DIFFERENTLY.

DEPUTY MAYOR ELFERS. THANKS, MAYOR.

THANK YOU. YEAH, AND I WANT TO JUST FOLLOW UP ON COUNCILMEMBER MALCOLM I think Kenna and we'll see. I think that it's a good idea to look at AREAS WHERE WE'RE LIKE, HEY, THESE PEOPLE ARE STRUGGLING OR WE WANT TO PROMOTE THIS TYPE OF BUSINESS OR WE WANT TO SUPPORT THIS TYPE OF GROWTH IN THE TOWN. TO ME, I THINK THAT'S A SEPARATE ISSUE. I WOULD, AND I'VE MENTIONED IT BEFORE, IN THE BUDGET CYCLE, I THINK THE IDEA RIGHT NOW WE CURRENTLY HAVE, I THINK, A $250,000 BUDGET ITEM FOR GRANTS ON STCs RELATED TO IMPACT FEES FOR BUSINESSES THEY CAN APPLY AND THEY HAVE THE OPPORTUNITY. IS IT STCs OR IS IT WE HAVE SOMETHING?

We do not. We did set some money aside in our utility rate model, but we couldn't achieve the legal hurdles we needed to make that program work under Washington state law.

Okay. Is that something that would be a problem to try in the general fund? It would be the same thing? General fund, you would have the ability to use general fund dollars to do those things. Would the legal hurdles be a problem? You'd be just fine using general fund dollars for that. Interesting. So to me, I think the discussion is if we say, hey, we want ADUs, for example, I think that was mentioned, and we want those to be less of a burden on people, or if we want... BUSINESSES. I THINK CERTAIN BUSINESSES ARE HARDER TO OPERATE. I THINK RESTAURANTS HAVE BEEN GOING OUT OF BUSINESS LIKE CRAZY AND PEOPLE LIKE RESTAURANTS. IT MAKES THE DOWNTOWN ALIVE. SO TO ME, IT MAKES MORE SENSE IN THE BUDGET DISCUSSION TO TALK ABOUT A GENERAL FUND GRANT PROGRAM AND JUST RAISE THE FEES ACROSS THE BOARD AND THEN HAVE A GRANT TO SAY, HEY, WE WANT TO SUPPORT THESE TYPES OF BUSINESSES. AND IT'S A SEPARATE DISCUSSION. THAT'S MY OPINION. JUST A RESPONSE TO THE COMMENTS IS I THINK THAT'S A GOOD DISCUSSION. I THINK IT'S VALUABLE. I THINK IT'S HELPFUL. I THINK IF WE COULD HAVE A FURTHER DISCUSSION ON THAT. BUT I THINK IT'S SEPARATE. THIS, TO ME, IS JUST ABOUT SELF-SUPPORTING. IT'S ABOUT MAKING THE FEES FAIR. AND THEN I THINK THE SEPARATE DISCUSSION IS, CAN WE SUPPORT THE THINGS WE THINK WE WANT TO EMPHASIZE IN OUR TOWN, SPECIFICALLY THROUGH A GRANT? AND WE'RE SAVING $350,000 HERE. PICK A BIG CHUNK OF THAT. AGAIN, I HAD ALSO ON THE FINANCE COMMITTEE WE HAD A GOOD DISCUSSION ABOUT, HEY, WE HAVE A BUDGET THAT USUALLY ACCOUNTS FOR MOST OF THE RETAIL SALES TAX AND THEN WE HAVE CONSTRUCTION INCOME SALES TAX THAT'S QUITE A BIT DIFFERENT AND SOMETIMES THE CONSTRUCTION SALES TAX IS QUITE A BIT HIGHER AND IT'S NOT RECURRING. And so I think one of the things I was also thinking about talking about that's related to this is in the budget cycle would just say, hey, if we anticipated $300,000 of sales tax from construction activity and we get a million, SHOULD WE MAKE A BUDGET POLICY OF WHAT DO YOU DO WITH THE EXTRA $700,000? I WOULD LIKE TO SEE THAT $700,000 INVESTED INTO SUPPORTING BUSINESSES THAT ARE GOING TO BRING RECURRING SALES TAX INTO THE CITY AND MAYBE DESIGNATE THAT WAY OR TO DO THINGS SIMILAR. SO TO ME, THIS IS A GOOD DISCUSSION FOR BUDGET STUFF, BUT I THINK FOR THE FEE MODEL, I THINK TO ME YOU KEEP THEM SEPARATE AND I THINK WE HAVE THE DISCUSSION SEPARATE. I THINK THAT SOLVES THE PROBLEM AND IT KEEPS THIS STRAIGHTFORWARD. THAT'S MY OPINION.

THANK YOU. COUNCILMEMBER MALCOLM.

I MIGHT BE BEATING A DEAD HEARSE. JUST TO CLARIFY, COUNCILMEMBER OR DEPARTMENT MAYOR ELFERS, WHAT YOU'RE SAYING IS THAT WE SAY YES TO THE 30% AND THEN WE DEAL WITH ANY KIND OF ENCOURAGEMENT FOR RESIDENTIAL OR ADUS OR WHATEVER TYPE OF BUSINESS WE WANT IN THE BUDGET PROCESS LATER THIS YEAR. OKAY. LOVE THAT. I'M ALL IN SUPPORT FOR THAT. I LIKE THAT.

COUNCILMEMBER KENNEDY.

Can I clarify with staff, if we were to take an approach like that, it sounded like that was maybe a grant program or something that we would work up. What burden does that place on staff? Because we're trying to recoup money that is because of a burden placed on staff. And then if we're running a grant program and we've got a number of applicants and whatever that might look like on a yearly or every two year basis, what does that look like, if you can speculate?

Well, we have done this before when we had ARPA dollars, and it does take a little bit of staff time to administer. I think putting the appropriate parameters about what council wants to do with that type of grant, what kind of businesses you want to encourage, is obviously something that can come under some scrutiny from the public because you're favoring one type of business or one type of RESIDENTIAL DEVELOPMENT OVER ANOTHER. AND WE SAW THAT A LITTLE BIT WITH OUR CARES AND ARPA DOLLARS THAT WE AWARDED FOR GRANTS. SO THERE IS SOME POLITICAL RISK AT THAT. FROM A STAFF POINT, YOU KNOW, IT'S NOTHING THAT WE COULDN'T ROLL INTO THE BUDGET PROCESS AND WORK THROUGH. AS LONG AS WE'RE DOING IT LIKE ONCE EVERY TWO YEARS AND NOT EVERY SIX MONTHS WE'RE DOING A NEW GRANT CYCLE, IT'S SOMETHING WE CAN ABSORB.

SO LIKE IN THE SLIDE WHERE IT TALKED ABOUT, YOU KNOW, if we went 30% across the board, we could gain about $350,000. And I heard Deputy Mayor Elfers mention, I think, 250 or something. He just threw a number out there. I don't know how tied he is to that. But I'm just wondering, you know, we're recovering the full amount in one respect, but then we're also like putting it back out. Now, to his point, you know, we're encouraging types of development or residential improvements or whatever that might be. But to some respect, you are losing a piece of that with a grant program that we develop. Is that right?

That's absolutely correct. And, you know, I know 350,000, remember, that's looking back at 2024. If we don't have as much commercial activity or multifamily activity, it's probably not going to be 350. So when I work with the mayor to build the budget and we're looking at the revenue for development services, you're not going to see me add 350 to what we were normally collecting. You're going to see me probably add around $100,000. And if we collect 250, great. You know, that goes into the enterprise account and things are good. And you've got to remember, the other benefit to increasing the fees is it goes into the general fund. And the general fund pays for police, parks, streets, all those things that are very important that we provide to our community, but we have limited ability to increase revenue in the general fund. We've talked about this before when you look at when do the lines cross. Well, something like this and adding new revenue to the general fund keeps those lines from crossing sooner than later. and allows us to continue providing the same level or greater level of general fund services than we're providing today. So to your point, let me put a bow on it. If you put money into a grant, then you're really not solving this problem over here. That's when you shouldn't do it, but you also have other general fund dollars you could find for that.

Right. Yeah, thank you, Jason. I think I'm still where I'm at, where I don't mind an increase on residential, but I just would like them to bear a little less of that burden. I'm happy to go 30% on commercial, and I understand that is an impact on the business and developer community. But again, we've had 20 years without any increases here, and we are providing a heck of a service, and so there are some incentives there. I guess I'm curious, I've heard a couple VARYING VIEWPOINTS BUT JUST YOU KNOW IN TERMS OF COUNCIL WHERE WE END UP YOU KNOW ARE PEOPLE JUST WILLING TO MEET IN THE MIDDLE ON SOME OF THIS OR ARE WE JUST ONE THING OR THE OTHER AND AND YOU KNOW MAYBE THAT I DON'T KNOW IF WE CAN REALLY JUST WE CAN'T PROBABLY CAN'T DECIDE THAT TODAY BECAUSE WE'RE GOING TO BE REVISITING THIS AT AN ACTUAL COUNCIL MEETING IS THAT CORRECT JASON THERE'S NO

Well, we'd like to prepare the ordinance. It doesn't need an amendment on the floor because those are always cleaner. So we are looking for some direction. If it's 30%, right now I'm hearing, probably a majority or 30% across the board. So then my recommendation would be we prepare the ordinance for that. If you want an amendment to change it to make maybe residential less, for example, you can work with staff and we can put an amendment together. I would encourage discussion tonight because if you can kind of work through that issue tonight, it's much easier to do it in a study session than it is at a regular council meeting.

DEPUTY MAYOR ELFERS, YOU WERE ON HERE, BUT MALCOLM GOT IN FRONT OF YOU, SO COUNCILMEMBER MALCOLM, WE TOUCHED SOMETHING DOWN HERE. THERE YOU GO.

THANK YOU, MAYOR BOWMAN. I GUESS MY THOUGHTS ARE, I LIKE WHERE WE WERE GOING WITH THE IDEA OF APPROVING THE 30% AND THEN GIVING US A LOT OF DISCRETION THAT WE COULD CHANGE YEAR ROUND ON IF WE WANT TO SUBSIDIZE CERTAIN THINGS AND WHATNOT. APPRECIATE THE POLITICAL HEAT POINT, BUT I THINK WE'LL GET POLITICAL HEAT ON ANY DECISION WE DO OR WHAT WE DO ON IT. I LIKE THE IDEA OF HAVING WE LOCK IN THIS FEE AND THEN WE HAVE KIND OF THE BUDGET TALK WHERE WE SAY WHETHER WE ALLOCATE OR DON'T ALLOCATE OR CREATE SOME SPACE FOR BEING ABLE TO FUND THESE TYPE OF THINGS AND THEN HAVING THE ABILITY TO KIND OF ADDRESS THAT AS WE GO THROUGH THE YEAR ALL THE TIME, AND I FEEL PRETTY GOOD ABOUT THAT. IT MAKES THIS CLEAN AND SIMPLE, AND IT MAKES THAT TYPE OF QUESTION WHERE WE'RE TALKING ABOUT FUNDING THINGS A LITTLE BIT MORE DIFFICULT, BUT I THINK THAT'S WHERE THOSE DIFFICULT CONVERSATIONS SHOULD LIVE, NOT NECESSARILY HERE LOOKING AT PAST DATA THAT MAY NOT BE FUTURE DATA.

DEPUTY MAYOR ELFERS.

I JUST WANT TO JUST CLARIFY SOME TERMS. SO I THINK I WOULD SAY IF WE USE THIS AND WE GAVE SOME GRANTS TO A RESIDENTIAL, I THINK THAT WOULD BE A TRUE SUBSIDY. MY EXPECTATION, IF I WAS COMING WITH MY VIEW ON HOW TO HANDLE A GRANT PROGRAM ON COMMERCIAL OR BUSINESSES, I THINK YOU WOULD You would really, the goal of the city is to not raise taxes. So if you can incentivize businesses that bring sales tax into the city, then you're really investing in businesses. And I see that as different. So to me, that would be one trigger that I would be interested in looking at with any excess revenue is to say, hey, can we incentivize businesses to come here that are struggling to make businesses work or get a permit going? To me, that's an investment. They bring in sales tax because they're selling food or because they're selling something retail or something. So then you end up – so then you potentially politically – you have some service companies that don't have sales tax that you're not helping as much and that's – but I think those generally have higher margins a lot of times. So anyways, that would be my – just response. So I think it is a subsidy when you apply it to the residential side because you don't get anything back from it besides really people are happier and you have more people in town with nicer houses hopefully that did remodels. OR ADDED ADUs, BUT I THINK WITH THE BUSINESSES, I WOULD LIKE TO TARGET THAT TOWARDS SOMETHING THAT WOULD HAVE A LONG-TERM RESPONSE OR INCOME.

OKAY, THANK YOU. SO FOR CLARITY THEN, I'M HEARING YOU SAY 30% ACROSS THE BOARD. AND AS COUNCILMEMBER MALCOLM SAID, TAKE UP THE GRANT PROCESS OVER HERE SEPARATELY. AND SO COUNCILMEMBER MALCOLM, ARE YOU AT THE 30%? IT DIDN'T WORK. THANK YOU. I'M GOING TO LET COUNCILMEMBER KENNETT GET IN HERE. I KEEP MUTING HIM ACCIDENTALLY. THANK YOU.

NO PROBLEM. A QUESTION ABOUT THE MECHANICS OF THE GRANT PROGRAM VERSUS THIS. AGAIN, GOING BACK TO THE 20 YEARS, WE HAVEN'T CHANGED THESE IN 20 YEARS. IN MY MIND, ONCE WE ADOPT SOMETHING HERE, IT'S PROBABLY GOING TO HAVE A LONG SHELF LIFE. COUNCIL MAY A FEW YEARS DOWN THE ROAD, DECIDE THEY WANT TO ADJUST THAT, BUT MORE THAN LIKELY WE'RE GOING TO BE HERE FOR A WHILE. WITH A GRANT PROGRAM, IF WE DO IT ON AN EVERY TWO-YEAR BASIS OR SOMETHING, THE NEXT COUNCIL COULD SAY, ACTUALLY, WE DON'T CARE ABOUT THAT. WE DON'T WANT TO PRIORITIZE THAT ANYMORE. AND SO IT'S GONE. SO THAT'S PRETTY EASY TO UNWIND AND JUST NOT FUND. IS THAT CORRECT? THAT'S CORRECT. Okay. That does make me... I appreciate Deputy Mayor Elfer's... I love the idea and where we could land as a council on what we want to fund and prioritize and lower the barriers and things like that. It just doesn't, to me in my mind, have... STABILITY TO KNOW THAT IT'S GOING TO LAST, MIGHT LAST FOR TWO YEARS WHILE WE'RE ALL TOGETHER HERE, AND THEN WHO KNOWS WHAT THE NEXT COUNCIL WANTS TO DO. SO I'M PROBABLY STILL WHERE I STARTED, BUT I DO APPRECIATE THAT, AND I CAN SUPPORT IT WHEN THE TIME COMES.

THANK YOU. COUNCILMEMBER WILSEY. YOU GOT A, OH, I'M SORRY, WE GOT COUNCILMEMBER HOXTERS STEPPING IN HERE. THANK YOU.

Thank you, Mayor. I hear what Council Member Kenna is saying. I really appreciate the sentiment of looking out for the residents that are here and that bear a lot of load. There's a lot of people that have lived in this town. And I know that we are incentivizing ADUs. We want that. I know we want people investing in their home, keeping them looking nice and making this a place where they plant roots and this is their family home. So I really appreciate what Councilmember Kenna had to say. What I want to hear is maybe from the staff's perspective, what does that look like? if it wasn't raised 30% on residential? I don't know if Jason or Doug can speak to this. Does this create any sticky points for staff as far as how you address this, or is this something that is not that hard to implement?

Not to defer to Doug on the implementation, but as far as if council wanted to leave residential, I WOULD JUST LOOK TO COUNCIL TO SAY YOU'RE GOING TO HAVE MORE DIFFICULT BUDGET DECISIONS IN THE FUTURE BECAUSE IT'S LESS GENERAL FUND REVENUE THAT'S AVAILABLE AND IT WILL CONTINUE TO DRY UP YEAR OVER YEAR AND IT WILL EVENTUALLY COME TO A POINT WHERE YOU HAVE TO START LOOKING AT SERVICES. THAT'S NOT TO SAY YOU SHOULDN'T MAKE THAT POLICY DECISION TODAY. YOU MIGHT HAVE TO REVISIT THIS IN THE FUTURE. in your revenue toolbox to look for options. And you may not. We might have enough economic development, which is all of our hopes, that we can grow that sales tax pie.

And then as far as the residential, I mean, we've heard the statistics. Maybe it was one new home last year or two. Can't quite. Two? Yeah, there was two last year. Right. So I don't know how much money we're missing on two homes on that. And I don't know how many ADUs were added. But by the end of it, I mean, the large chunk of the money is coming from commercial, not residential. So as far as us getting in a lot of trouble financially because we're it comes to where we're subsidizing too much residential I mean does it percentage-wise isn't that kind of much much smaller the chunk of the pie than say commercial yeah so as far as implementing it Doug I mean if people come in permits and if it's not a standard across the board does that make it hard for you guys or is it doesn't we implement stuff from council decisions all the time you know we

looking for direction, and then we follow that direction.

Yeah, thank you. And then City Administrator Wilson mentioned it kind of gets political when you start kind of picking winners or losers on some of the percentage and all that. But we just reduced for childcare 80% on impact fees, right? I mean, that could get political as far as us picking. So this is not uncharted waters as far as who we're helping out on some and who we're not. And as far as representing the people in the community that own homes here, that invest here, and their kids go here, and they want an ADU for their mother-in-law or whatnot, I don't see anything wrong with the suggestion that Council Member Kenna made on that. So I don't know if we can explore that a little bit more, but I really don't see how that's going to be a big detriment to the money we're bringing in. That's my initial thought.

I can just remind council, though, when we talk about the early learning center traffic impact fees that were reduced, that is not a general fund revenue. That is a special revenue. So it does have a different carve-out under state law. So I just want to make sure that we understand that. I think really what this comes down to for council is are you okay with helping your neighbor offset their permit costs? And maybe you are, and that's perfectly fine, but we need to be transparent with that. IT'S ONE THING TO SAY WE'RE NOT GOING TO HELP THE COMMERCIAL AND MULTIFAMILY, BUT ARE YOU OKAY WITH YOUR NEIGHBOR? IF YOU ARE, COOL. IF NOT, THEN WE NEED TO FIX IT.

DEPUTY MAYOR ELFERS.

I JUST WAS CURIOUS, CHILANI, ON THE ADU EXAMPLE, IS THERE A COST ASSOCIATED WITH THE ESTIMATES? THIS IS JUST AN EXAMPLE, RIGHT? SO ON THE ADU ONE, SO THERE'S EXISTING TOTAL FEES. CAN YOU EXPLAIN WHAT THAT'S BASED ON?

So this would be a permit for additional dwelling units, a garage extension. So this would be a garage that's converted into an additional dwelling unit, Doug?

Yep. So it would be a couple hundred thousand dollar project, or is there a dollar value that you think would fit into this?

I've seen ADUs down in the $40,000 range. But that's somebody self-doing it as well. So get pretty creative, as you know.

Does the permit fee have anything to do with the value of the project?

The valuation, yes. So we ask the applicant to provide a valuation that's reviewed to make sure it's legit. If it's not, we send it back to them and tell them that you've missed a few things. Okay.

So for this example, $1,800 building permit for an ADU, do you know what value that would be? I do not. I do not know that.

Evan might know online.

Sorry, I'm checking that right now. I have the building permit value, but I do not have the valuation, unfortunately.

My thought was I would say an ADU would cost more along the lines of IT WOULD BE A PRETTY SIGNIFICANT PROJECT, AND TO ME, AN INCREASE OF $500 IS REALLY NOT GOING TO MAKE OR BREAK THE PROJECT FOR ANYBODY. I MEAN, I'VE DONE PROJECTS BEFORE. THE PERMIT FEE IS THE SMALLEST FEE. IF YOU LOOK AT THE SCHEDULE HERE, THE SDCs ARE REALLY WHAT'S DRIVING THAT. IF THE TOTAL COST OF FEES FOR AN ADU EXISTING TODAY IS $18,000, And 1,800 is the building permit going from 1,800. I just feel like it's such a, I just want to just bring that to perspective. This is a fee that is connected to the value of the project. And it's a very small amount. And I've never seen anybody talk about this being, STC fees get, people complain about STC fees. Nobody complains about permit fees. So I just, to me, I don't want to talk about this forever because I feel like it's a very small part of a project. I would guess this is $100,000 or more project. AND YOUR FEE, IT'S JUST, IF YOU HAVE ENOUGH MONEY TO DO A $100,000 REMODEL, $561 INCREASE IS REALLY NOT GOING TO BE MATERIAL AT ALL. IT'S GOING TO BE SO SMALL. SO THAT'S MY OPINION ON IT.

I'LL JUST, MAYOR, IF I COULD, DEPUTY MAYOR ELFERS IS ABSOLUTELY CORRECT. WHEN WE HAVE PEOPLE THAT COMPLAIN ABOUT PERMIT FEES, IT IS NOT THE BUILDING PERMIT FEE. IT IS TRAFFIC AND THEIR UTILITY SDC FEES.

Well, the reality is there's two ways that cities make money. It's taxes and fees. And there's really no other revenue streams in this day and age for cities. I think that, you know, that's something I've learned. It costs a lot to live. That's kind of the end story. It costs a lot to live in this state. And in this city, we're kind of median. when you look at where we fall. There are some cities that are much more expensive, and there are cities that provide no services that are a lot less expensive. So I just think that's something to take into account. This is not going to solve reducing fees on taxpayers. And so for me personally, I don't want to pay for your bathroom because that money's got to get spread somewhere. So that's just kind of the nuts and bolts of it. I think that there have been a ton of great points brought into view here. So it's up to you guys to decide. I think when we get into the budgeting, though, there's going to have to be even deeper discussions based on how this flushes out. My opinion. So we'll try this again. I'm going to try it. COUNCILMEMBER MALCOLM.

THANK YOU, MAYOR. JUST FOR ABSOLUTE NUMBERS, JUST SO WE HAVE THIS TO FRAME IT, THE INCREASE ON THE THREE CATEGORIES THAT I ASSUME ARE RESIDENTIAL, WE'RE TALKING ABOUT $5,900. THE COMMERCIAL CATEGORIES, THE TWO THAT I LOOK AT, IS ABOUT $41,000. SO IN THE SCHEME OF THINGS, WE'RE DEGOTIATING THE $5,900 UP HERE WHEN WE TALK ABOUT MAKING IT EASIER ON RESIDENTIAL.

SO I'M LOOKING. I'M TRYING TO SEE. COUNCILMEMBER EVERS.

I WOULD JUST REITERATE, I'M FOR 30% ACROSS THE BOARD, AND I LIKE A LOT OF THE IDEAS I'VE HEARD TODAY, AND I WOULD BRING IT UP TO BUDGET, AND IF YOU GET FOUR VOTES, THEN WE GOT FOUR VOTES FOR WHATEVER YOU WANT TO DO IN A DEEPER LEVEL. BUT FOR SIMPLICITY AND WHAT HAVE YOU, I WOULD JUST DO 30 ACROSS THE BOARD.

ALL RIGHT. ANYBODY ELSE WANT TO PUSH THEIR BUTTON SO I CAN TURN YOU ON? Council Member Hochstetter.

Sounds like we're really looking for a way to move forward here. And one thing I'm hearing is we can go 30% across the board, and then if there is a need to bring up an amendment... to speak to some of the other ideas that have come up today, that's something. But as far as us making progress and being smart about our time and moving forward, we can move forward with the 30% across the board and then look at amendments if need be or grants if that's something that's discussed as well. But at least that would get us to move forward if we went 30% across the board right now, right? Is that kind of what I'm hearing?

Yes, that is what you're hearing. Unless there's more dialogue on it, I think that there's been a ton of input put into this, right? So, 30%? I'm okay with it. Okay. All right. Mr. Evers, Council Member Evers, will you hit your button, please?

Oh.

Okay. Your turn. Just verify again, 30%. Okay. 30% across the board.

Okay.

Okay. Thank you. Now don't go crazy on us. Deputy Mayor Elpers.

30%. Okay.

All right. Council Member Kenna.

I'll just say I think I may pursue the amendment option just as another option on the table for council. I'm happy to move forward tonight with the 30% and then see what we have in front of us at the council meeting.

Council Member Wilsey. 30%. That's great. Okay. And Council Member Malcolm. Wait, wait. Oh, Evers hit his button. I couldn't get to you in time. Last time.

Go ahead. I guess my thing was 30%, and then if we have any other issues, talking about the budget, as Councilman Ken is saying, next week or whenever we vote on this, have amendment then. I'm just thinking, my thing was this, let's wait until the budget and then. EVERYBODY CAN THROW IN THEIR IDEAS AT THAT POINT AND SEE IF... COUNCILMEMBER MALCOLM. YES.

OKAY. THAT SOUNDS LIKE WHAT IT LOOKS... SOUNDS LIKE WE HAVE IS 30% ACROSS THE BOARD WITH AN OPTION FOR AN AMENDMENT WHEN WE COME NEXT WEEK TO COUNCIL.

SURE. AND WHAT WE'LL DO IS WE'LL PREPARE AN ORDINANCE FOR THE 30%. COUNCILMEMBER KEN OR ANYBODY ELSE WHO WOULD LIKE TO WORK ON AN AMENDMENT, PLEASE REACH OUT TO DOUG BEAGLE. THIS ISN'T THE ONLY ITEM ON TONIGHT'S AGENDA REGARDING DEVELOPMENT SERVICES. IT'S ALSO THE ENTERPRISE FUND DISCUSSION AND REALLY IF YOU'RE GOING TO INCREASE IT BY 30% ACROSS THE BOARD, IT'S PRETTY STRAIGHTFORWARD. YOU NEED TO REALLY MAKE THIS AN ENTERPRISE FUND AS WELL SO WE CAN APPROPRIATELY TRACK OUR EXPENSES TO MAKE SURE THAT WE ARE FOLLOWING ALL THE RULES ON GENERAL FUND SUBSIDIES. SHIVANI, ANYTHING YOU WANT TO ADD ON THIS ONE?

YES. SO ENTERPRISE FUNDS, JUST LIKE UTILITIES, THE DEVELOPMENT SERVICES HAS THE OPPORTUNITY FOR CITY POLICY TO ESTABLISH AN ENTERPRISE FUNDS WHERE ALL THE PERMIT REVENUES ARE STORED. It weathers the storm in the downturn of economy. There's times where you might have development fees collected ahead of a fully commercial development being completed. And if it sits in general fund, then it just looks, and it could be used elsewhere. So having an enterprise protected as a user fee-based model within SAO and borrowers, this self-sustains the development services department. And then we have here like a positive, like a pros and cons list here. Really setting up enterprise funds really puts the department at a full cost recovery, aligns the fees closely to the cost of service provided. It reduces the burden on general fund that's been placed on. There's a greater financial transparency. So if you're seeing revenues less, expenses more, you can adjust and reflect as the years come by. AND THEN THE BENEFICIARY PAYS COST PRINCIPLES. SO THE USER FEE IS COST OF SERVICE, SO YOU'RE PAYING THE SERVICE FOR THE BENEFIT YOU'RE RECEIVING. IT'S A LONG-TERM FINANCIAL PLANNING TOOL, SO IT DOES SET UP THE DEPARTMENT AND DIVISION AND THE TALENT, SO THE STAFF, TO BE IN A WHOLE POSITION FOR YEARS TO COME. THE NEGATIVE OR THE PRO SIDE OF THINGS IS IT DOES PUT A BURDEN ON THE DEVELOPMENT COMMUNITY, SO THE COST AND THE FEES WILL BE ADJUSTED, RIGHT-SIZED IN NEAR FUTURE. IT IS A TRUE COST OF SERVICE. IT REQUIRES ADEQUATE RESERVES, SO WE'RE LOOKING AT TIMES THREE MONTHS WORTH OF FULL RESERVE THAT COULD BE CALCULATED AND SUSTAINED IF THAT'S THE CITY POLICY. AFFORDABILITY. IN COMPARISON TO OTHER NEIGHBORHOOD JURISDICTIONS COMES IN PLACE, BUT AS YOU CAN RECALL IN OUR LAST PRESENTATION, SEMNAR REALLY FALLS IN THE LOWER END TO MIDDLE END. SO I DON'T SEE ANY NEAR-TERM IMPACT ON THIS, LONG-TERM DEFINITELY, SOMETHING THAT I WOULD RECOMMEND FOR ALL OUR DEVELOPMENT SERVICES COMMUNITIES SPECIFICALLY IN PACIFIC NORTHWEST AS THE COST IS INCREASING TO DO AN IN-HOUSE OR CONSULTANT-LED COST OF SERVICE STUDY EVERY THREE TO FIVE YEARS. SO DOUG AND HIS TEAM WILL GET A FULL MODEL AND THEY'RE ABLE TO UPDATE THE NUMBERS AND INTERNALLY CALCULATE THE COST OF SERVICE. ONE KEY POINT I DID WANT TO POINT OUT, BY HAVING AN ENTERPRISE FUND DOES NOT ELEVIATE COMPLETELY THE ACCESS TO GENERAL FUND. THERE MAY BE TIME WHERE GENERAL FUND COMES IN AND SUPPORTS THE ENTERPRISE FUNDS IN ONE OFF, AND THAT WOULD BE AN EXECUTIVE LEADERSHIP DISCUSSION AND FORESIGHT INCLUDING.

ANY QUESTIONS ON CREATING THE ENTERPRISE FUND?

OKAY. YOU READY? OKAY. DEPUTY MAYOR ELFERS.

I DON'T HAVE ANY QUESTIONS. I JUST THINK IT'S KIND OF A NO-BRAINER. I THINK, YOU KNOW, 20 YEARS AGO WE UPDATED THE COST. THIS KIND OF KEEPS IT SO WE DON'T GET BEHIND AGAIN. AND WE'RE KEEPING UP WITH MAKING SURE IT'S NOT SUBSIDIZING IT UNLESS WE WANT TO MAKE INTENTIONAL OPPORTUNITIES TO SUBSIDIZE IT WITH WHAT I THINK WOULD BE THE BETTER WAY TO DO IT. SO JUST BEING MORE INTENTIONAL INSTEAD OF JUST LETTING, YOU KNOW, LETTING THINGS KIND OF GO. SO ANYWAYS, I THINK AT OUR PRICE FUND, YES.

COUNCIL MEMBER MALCOLM.

JUST A QUESTION FOR CLARITY. WHAT'S THE FLUIDITY BETWEEN GENERAL FUND AND ENTERPRISE FUND IF WE HAVE SHORTFALLS OR WINDFALLS? WHAT HAPPENS? HOW IS THAT MANAGED?

SHORTFALLS, JUST LIKE OUR CEMETERY IS A GREAT EXAMPLE OF THIS, RIGHT? IT'S AN ENTERPRISE FUND. AND WE SUBSIDIZE THAT WITH GENERAL FUND DOLLARS EVERY SINGLE YEAR BECAUSE THE REVENUE COLLECTED AT THE CEMETERY DOES NOT PAY FOR THE OPERATING COSTS.

IF THAT WOULD COME BEFORE US, WE WOULD HAVE TO VOTE THAT EACH TIME. And what if there's something crazy where we end up making way more money in that fund? Does it live in that fund and stay in that fund? It can never go into the general fund. So it could never be a profit center for us.

Correct. Okay. Per statute, permit fees cannot be generating revenue. So it really has to be cost of service. Future plans of financial sustainability can come in. Oh, let's have a reserve account so we could put some extras in that reserve fund so there could be more conversations in the future.

It's like my kids. When they need money, I have to pay, but if they have extra, I don't see it.

It's exactly like that. If your kid is in college, you do not want to be in your household mortgage account. It needs to be separate.

Thank you.

I do think, though, Council Member Malcolm, so that was a hard transition for me to transition from business, profit loss, or cost centers to government, which where we're obligated to keep the money in that account, and it goes back into the community. WHERE THE PEOPLE PAY FOR IT, RIGHT? SO IT'S LIKE IT'S A TOUGH ONE, BUT WE'RE NOT SUPPOSED TO BE SITTING WITH A BIG POT OF MONEY IN THE BANK. WE'RE SUPPOSED TO BE USING IT TO KEEP IMPROVING THE COMMUNITY.

Clarification on the, I heard at the beginning, I think, you know, if we're going to do a 30% across the board, then we really should do an enterprise fund. So if we didn't do 30% across the board, is there less of a use for an enterprise fund?

Absolutely not. I would still recommend doing this. It's a very clean way and transparent way of managing this fund and this activity. Another benefit I see is when we have these big projects, we use the high school as an example, At times, that's too much work for our staff to do. And rather than increasing staff for one big permit or a couple big permits, we'd much rather go use contracted labor to go and help us get that permit reviewed in a timely manner. And it's much easier in an enterprise-type fund to say, well, look, we got this big bump over here from this permit, and that's why our professional services went up. IT'S MUCH EASIER AND TRANSPARENT TO YOU AS ELECTEDS WHO ARE REVIEWING THE BUDGET AMENDMENTS TO SAY, OKAY, WELL, I GET IT. OUR REVENUES ARE WAY UP AND THAT HAD TO DO WITH THE EXPENSES TO CORRESPOND WITH THAT.

JASON OR DOUG, DOES THIS CHANGE IN ANY WAY IF WE WENT THROUGH WITH THE ENTERPRISE FUND HOW WE TRACK OUR STAFF TIME AND THESE PERMITS AND EVERYTHING? ARE WE STILL GOING TO BE LOOKING AT ARE WE GETTING A FULL 100% OR CLOSE TO THAT? OR BECAUSE IT'S GOING TO HAVE A DEDICATED FUND, SO HOW DOES THAT CHANGE THE WAY WE TRACK THINGS IN THE FUTURE.

SURE. SO YOU CAN IMAGINE HOW WE'RE TRACKING IT NOW CURRENTLY WITHOUT THIS, RIGHT, MAKING SURE THAT WE'RE BEING EFFICIENT. SO THIS GIVES ME THE TOOL TO EVEN MORE DIVE DEEPER INTO MAKING SURE THAT WE ARE ADEQUATELY DOING OUR PROJECTS AND COLLECTING THE FEES WE NEED TO COLLECT. SO I'M EXCITED ABOUT IT, ACTUALLY.

EVEN WITH AN ENTERPRISE FUND, WE'RE STILL GOING TO CONTINUE THAT TRACKING, AND IF WE'RE STILL SEEING A GAP THERE, WE CAN ADDRESS THAT DOWN THE ROAD OR WHATEVER.

Okay. Any more questions? All right. What's the direction?

So next step, we'll be working on two ordinances for you. One will be to adjust the fees. Like I said, if you want to make an amendment, please reach out to Doug Beagle ahead of time so he can help you craft that. The second ordinance actually creates that Development Services Enterprise Fund. That has to be done by ordinance. Interesting. The fees would actually go into effect January 1st, 2027, so there is some time to ramp those up. BUT THE IMPORTANT THING ABOUT DOING THIS SOONER THAN LATER IS IT ALLOWS US TO PLAN ON THAT NEW REVENUE AS PART OF OUR BUDGET PROCESS THAT WE'RE GETTING READY TO KICK OFF.

ALL RIGHT. THANK YOU. ALL RIGHT. SO WE WILL MOVE ON TO ITEM NUMBER TWO. THANK YOU VERY MUCH. THANK YOU. THANK YOU. AND THIS IS AROUND OUR COUNCIL VACANCY, SO I'LL CALL ON CITY ADMINISTRATOR JASON WILSON TO TALK THROUGH THIS, PLEASE.

THANK YOU, MAYOR. So as you know, we have a council member vacancy that we need to fill, unfortunately. So we put together a process overview for filling that seat. This process is governed by state law as well as your own council rules. It sets forth what the minimum qualifications are under state law. You have to be continually resided within the Sumner city limits for a minimum of one year. And you must be a registered voter in the city of Sumner. This is considered a short term, so if a member vacates their seat within a year, that's Council Member Ranke in this case, the appointment shall be until the general election results of year two are certified. So that means that this position will be on the ballot next year and whoever you appoint to this will be in that seat until the election is certified in late November. And then the following person who's elected will have a short term, a two year term. So in your rules, it sets out the process for this. You need to advertise, you need to go through a written application, an oral interview, an appointment, and swearing in. Under state law, this position must be filled within 90 days. Failure of council to fill it within 90 days results in the Pierce County Council getting to appoint this position. So we need to have somebody in this seat by September, I think it was 13th, because it's calendar days. So we are set to advertise for this starting on July 1st. Under your rules, we're required to advertise it on the website, the newspaper record, which is the Enumclaw Courier-Herald, as well as posted notice at City Hall. We will also put it in our e-news as well as on our social media platforms. The application, it's due 30 days from the date of posting, so that would be July 30th at 5 p.m. The application supplemental questions and resume are required, and all three must be included for it to be a complete application. Endorsements, letters of reference, or other materials are not accepted, and applications and supplemental material will be distributed to Mayor and Council and then posted electronically in redacted format following the PDC rules for disclosure. Currently, the application has supplemental questions, and there's a two-page limit response. And I'm not going to read these. These are the same questions we've used for a number of years. And then there's an interview. Per your rules, it needs to be held at the first available study session, so that's August 10th in this case. The order is set by random draw, and applicants not being interviewed may be asked to leave the room, but they're not required to do so. We do provide the questions in advance so that they can be fully prepared and ready to interview. The interview questions were changed earlier this year when we went through an appointment process. We increased them from three questions up to five. And so those are here on the screen. Excuse me. Council may limit the response time based on number of applicants. Prior to this year, we had historically given five minutes. When we went through the last appointment process in March, each candidate was given 10 minutes to respond. If I recall right, most candidates were in the five to eight minute range on responses. Traditionally, typically, council has not asked the questions, rather, All the people that are being considered for appointment just respond and kind of give an oral presentation, making sure that they had all five of those questions. You are allowed to do an executive session to discuss qualifications, but no straw voting may occur. And then in your rules at the next regular council meeting, which is August 17th, you'll do your appointment and nominations process. So you can have another executive session if needed. You'll do a call for nominations. No second is required, and the nominations must be closed by a motion, a second, and a majority vote of counsel. Then the public has two minutes to provide in-person comment just on the names that were nominated. Then voting occurs. It's done by roll call. Appointments do require a majority vote, and you can vote as many times as needed to obtain that majority. In the case of a tie, the mayor does cast the deciding vote. You can also have an executive session if you would like. Council may postpone the election to a date certain if a majority vote is not received. Just keep in mind you do have the appointment deadline under state law. And then swearing in, your rules actually say that the council member is sworn in at the next regular council meeting. That next regular council meeting is September 8th due to just the calendar that time of year and the holidays. I would be recommending to council you actually suspend your rules and swear the person in at the August 24th study session. That way that new council member can participate in the council retreat that we have scheduled later in that month, as well as kick off the budget process with all of you as a group. So I'm happy to answer any questions.

Council Member Evers.

Okay. I think I don't plan on missing hardly any meetings, but I'm out of town the 24th, if that matters at all.

No, that would be just a swearing in. So you will miss the start of the budget process on the 24th.

Okay. Sorry about that. That's okay. The council, I wasn't sure. You said that the person that we pick would be, if they don't run again, say that it would be after the election or it would be the first of the year? I wasn't sure about that.

Yeah. So the person who you appoint will hold the seat until the November 2027 election is certified, which typically happens right around Thanksgiving. Okay.

So they'll be in the seat approximately a year and a half-ish. Yes. Okay. Deputy Mayor Elvers.

I'm just making sure. Do you need any direction from us? Because this process sounds great to me.

Unless you wanted to change questions, everything else is already set in your rules.

Council Member Malcolm.

Just for clarification, to move that data to the study session, do we have to do anything in regular council, or do you run with that and that's just part of the calendar?

Yeah, you will have to take a vote to suspend your rules to do that, and we'll prepare that for you.

Anyone else? Okay. Thank you very much. All right. So with that being said, I would like to adjourn this meeting at 7.11 p.m. Thank you.