REPORT TO COUNCIL
SUBJECT
Title
Action to Adopt a Resolution Amending the FY 2026/27 Municipal Fee Schedule to Adjust Rounding under the Community Development Department’s Building Division and to Amend Fees under the Electric Utility Department
Report
BACKGROUND
The FY 2026/27 Municipal Fee Schedule (“Fee Schedule”) was adopted by the City Council on April 21, 2026 via Resolution No. 26-9552. As part of the update reflected in the FY 2026/27 Fee Schedule, staff recommended the rounding of fees that included cents, in an effort to address any issues arising from the penny shortage should customers pay in cash for any fees in the schedule.
During the Public Hearing on April 21st, changes to the Department of Public Works’ Engineering Division section were approved to adjust the rounding of fees to the nearest nickel, as opposed to the nearest dollar, to remain as close to cost recovery as possible. These rounding adjustments, however, were not brought forward for the Community Development Department’s Building Division. A large portion of the Building Division’s fees are charged based on scaled increments. These are the types of fees that staff is recommending be rounded down to the nearest nickel, rather than down to the nearest dollar.
Fees listed in the Fee Schedule are based on the full costs of offering particular services, with no fees set higher than that full cost. Under the Electric Utility Department, there were two fees with incorrect cost of services noted, leading to the fees being set incorrectly. Staff is recommending corrections to those two fees.
DISCUSSION
The Building Division is funded almost solely by the fee revenue collected as part of the City’s development review process, which includes plan review, permitting, and inspection services. As such, setting fees as close to cost recovery as possible is paramount for the Building Division to maintain the staffing levels required to continue offering high levels of customer service. Collecting fees also enables the Division to invest in technology to gain efficiencies and streamline the permitting process.
The Building Division uses the Accela permitting system to charge and collect its fees, as outlined in the Municipal Fee Schedule. Upon the annual adoption of the Fee Schedule, staff updates the permitting system to reflect the fees for the upcoming fiscal year. During this update, Building staff discovered that the rounding of the fees would amount to a significant loss of revenue when compared to the cost of providing these services.
As mentioned, many of the Division’s fees are scaled increments. Because of this fee structure, the rounding of the fees greatly impacts the revenue that can be collected. Staff estimates an impact of approximately $957,000 in fee collections will occur without taking action to adopt this recommended change.
The Electric Utility Department had two fees: 1) Underground - New Single Family/Residential and 2) Underground - New Multiple Units/Residential that cited the incorrect cost of service amount under the “Full Cost” portion of the Fee Schedule. Because these fees were set at full cost recovery based on the “Full Cost” amount, the fees adopted need to be corrected to align with the corrected cost of service.
The updated fees (26) are reflected in Attachment 2 (Building Division) and Attachment 3 (Electric Utility Department) of this staff report.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to section 15378(b)(4) of Title 14 of the California Code of Regulations in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
FISCAL IMPACT
Because a significant portion of Building fees are based on scaled increments and project valuations, the fees are more sensitive to rounding adjustments.
In FY 2025/26, the Building Division received 23 projects with a valuation of over $10.0 million. Using these 23 projects as a sample, the adopted FY 2026/27 fee schedule would result in a loss of approximately $750,000. Additionally, under the Fire Department, there are several Building Plan fees for Fire and CUPA services that are calculated as a percentage of the Building Plan Review fees. With the FY 2026/27 adopted fees, staff estimates an additional impact of approximately $207,000. Below is a high-level breakdown of the valuation ranges and the estimated impact fee revenue impact of the FY 2026/27 adopted fees, when compared to the FY 2026/27 recommended fees.
Because the development fee programs rely almost completely on fee revenue, potentially losing nearly $1.0 million in collections could greatly impact operations. Setting fees at or as close to full cost recovery as possible provides the Departments opportunities to invest in streamline operations, bring on additional staff needed, and improve customer service levels while leaving reserves intact for works in progress and future investments.
COORDINATION
This report has been coordinated with the City Attorney’s Office, Community Development and Electric Utility Department.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Adopt a Resolution Amending the FY 2026/27 Municipal Fee Schedule to Adjust Rounding under the Community Development Department’s Building Division and to Amend Fees under the Electric Utility Department Effective Immediately
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Resolution Adopting the Changes to the FY 2026/27 Municipal Fee Schedule
2. FY 2026/27 Municipal Fee Schedule Amendment - Building Division
3. FY 2026/27 Municipal Fee Schedule Amendment - Electric Utility Department