County to Reduce Builders’ Fees to Rectify Overbilling

Orange County may have overcharged builders by as much as $10 million in recent years, prompting the Board of Supervisors to vote Tuesday to cut inspection and planning fees and refund builders whose projects are not yet finished.

Last year alone, the overbilling totaled nearly $2.4 million. It was discovered by a consultant hired to study whether the fees the county charged builders in the unincorporated areas were in line with a state code. The code bars municipalities from charging more than it costs to oversee planning work.

Supervisors voted to reduce by 28% the fees for checking plans and inspecting residential and commercial projects. They also voted to give larger discounts for builders requiring repeated plan checks. The board’s move was welcomed by building industry representatives.

“There’s good news and there’s bad news,” said Lynne Fishel, deputy director of the county’s chapter of the Building Industry Assn. of Southern California, a trade group. “The bad news is that builders have been overcharged. But the good news is that the county’s taking steps to correct that.”

Even with the overbilling, Orange County still boasts some of the lowest building fees in the region, according to board documents.

Building fees are based on structure type and size, said Bob Chaparro, a senior staff analyst at the planning department. Under the new fee structure, a builder will save about $725 on a typical tract home and about $1,800 on multifamily projects, such as condominiums.

“It will be a significant reduction in fees,” said Fishel, whose group counts more than 300 home builders among its 1,000 members.

The county will offer refunds to builders on projects not yet finished, officials said.

Chapman University professor Esmael Adibi, considered an authority on Orange County’s economy, said he doubts the fee reduction will encourage new development in an area where sales already are hot. But it could benefit buyers.

“It’s not large enough to induce a housing construction boom,” he said of the fee decrease, “but obviously, it would help reduce the cost of building a home, which would eventually be reflected in the prices.”

The current housing boom should continue through the beginning of the new millennium. In the last fiscal year, nearly 9,000 building permits were issued. In the upcoming fiscal year, the county is expected to handle about 13,000 housing permits, Adibi said.

The overbilling can be traced back to the county’s financial collapse in December 1994. In the turmoil that followed the bankruptcy and eventual recovery, the county cut its planning costs but didn’t pass those reductions along to builders.

In other financial developments for the county, supervisors voted behind closed doors to split $10.3 million that inexplicably appeared in county accounts in recent months. Half will go to agencies that lost money when the county-run investment pool lost $1.64 billion.

A county audit by Price Waterhouse LLP failed to identify the source of the funds. The vote to split the money occurred in closed session after the board’s regular meeting. The action ends months of wrangling over what should be done with the money.

Irvine City Manager Paul Brady, who chaired a committee of pool investors, said that even though their share was small, splitting the funds was only fair. An agreement signed by the county and pool investors after the bankruptcy agreed that any unidentified money discovered later would be evenly split.

Since the bankruptcy, the county has repaid schools about 96% of the money they lost. Other government agencies, including special districts, have received about 92% back. The county has reclaimed less than 50% of its loss.

Times staff writer Jean O. Pasco also contributed to this report.

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Flawed Fees

A recent study revealed that the Orange County Planning Department has been overcharging builders millions of dollars in recent years. The Board of Supervisors voted Tuesday to refund builders charged under the old fee schedule, as long as their work has not yet received its final inspection.

‘98--99 Expenditures: $7.8 mil.

‘98--99 Revenue: $10.2 mil.

Surplus/Deficit in millions

‘94-5: -$100,000

‘95-’96: $1.2

‘96-’97: $3.2

‘97-’98: $2.8

‘98-’99: $2.4

Source: Planning Department