2025-02-18 CC Agenda Packet - ITEM D15 - Fee Deferral ProgramCITY OF
ELSEGUNDO
Discussion and
Consideration of a Building
Permit Fee and Development
Impact Fee Deferral Program
City Council Meeting
February 18, 2025
Background
Buildinq Permit Fees
• One-time charges covering
staff time for permit review,
processing, inspections, and
maintenance of infrastructure
(e.g., online systems, land
use regulations). Includes
state -mandated fees for
seismic safety and ADA
compliance.
Development Impact Fees (DIFs)
• One-time charges designed
to fund infrastructure and
service improvements to
address increased demand
from new developments (e.g.,
streets, sewer, parks, public
safety).
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 2
Background
Development Impact Fee (DIF) Implementation
• Approved by City Council on June 21, 2022
• Phased implementation:
• 50% in 2022
• 75% in 2023
• 100% effective July 1, 2024
• Fees adjusted annually based on the Consumer Price Index
(CPI-U)
ELSECUNDO
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 3
I&
El Segundo Fee Collection Stages
C
2/18/2025
Entitlement
Application
Stage
Building
Permit Stage
City of El Segundo 1 350 Main St El Segundo, CA 90245
Certificate of
Occupancy
Stage
4
EI 1)F(; UAUU
Current Economic Conditions
• High Lending Costs
• Borrowing costs have risen significantly, making it expensive for developers to finance
new projects.
• Higher interest rates increase the overall cost of development, reducing profit margins
and making some projects financially unfeasible.
• Inflation and Rising Construction Costs
• Material costs (steel, lumber, concrete) have been fluctuating, often trending upward,
which increases overall project expenses.
• Labor costs have also risen due to a shortage of skilled workers, further straining budgets.
• Supply Chain Disruptions
• Delays in material deliveries extend project timelines, increasing holding and financing
costs.
• Uncertain availability of essential building components makes planning and budgeting
difficult.
ELSEGUN DO
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 5
Current Economic Conditions
• Economic Uncertainty
• Developers face unpredictability regarding consumer demand, tenant
leasing rates, and long-term property values.
• Investors and lenders are more cautious, limiting access to funding for
commercial projects.
• Regulatory and Tax Burdens
• Development fees, permit costs, and stringent zoning regulations
increase upfront expenses.
• Cities often impose impact fees that developers must pay before
construction can begin, adding to financial pressures.
ELSEGUNDO
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 6
Current Fee Structure
ESMC15-32-6 stipulates that all DIFs be collected prior to
approval of a tentative or final subdivision map, parcel map,
grading permit, building permit, final inspection, or certificate of
occupancy.
2/18/2025
City of El Segundo 1 350 Main St. El Segundo, CA 90245
ri
EL,SECUNDO
Recent State Fee Structure Modifications
• Senate Bill (SB) 937
• Effective January 1, 2025
• Allows developers to pay certain housing development impact fees
later in the process at the Certificate of Occupancy or final building
inspection
• Require the property owner or recorded lessee to sign a contract
agreeing to pay the amount within the specified timeframe.
• recorded with the county recorder's office, creating a lien on the property.
• the local agency must record a release of the lien after fully paid.
ELSEGUNDO
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 8
Recent City Fee Structure Modifications
• City Council directed staff on the
January
21,
2025, meeting to
adjust
the Cultural
Development
Program
fee
structure
• Defer the applicable in -lieu fee of 1 % of the project cost to the
Certificate of Occupancy or final inspection.
• Amendment is scheduled for City Council consideration at the March 4,
2025, City Council meeting.
ELSEGUNUO
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 9
Possible Fee Modifications
• Recommendation: Similar administrative process as adopted by
the state legislature for housing developments
• Require a covenant to be recorded in the form of a lien for the
applicable fees
• The lien would be removed upon payment of fees and before any final
inspections or issuance of a certificate of occupancy.
• Application review fees and inspection -related permit fees
(residential, commercial, mechanical, electrical, and plumbing
fees) will remain unchanged.
r.'LtieccNoa
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 10
Case Study
Assumptions: ty ical construction loans are intended for 6 - 36 months, 8.8%
interest paid on �he amount borrowed during construction (average of range
between 6.125 and 11.5% as of 2025), with financing options beginning of
$100,000 or more.
Provided the above assumptions, the carry cost of accrued interest on $126,146, is
as follows:
6
Month Project:
$5,550.42
12
Month Project:
$11,100.85
18
Month Project:
$16,651.27
24
Month Project:
$22,201.70
30
Month Project:
$27,752.12
36
Month Project:
$33,302.54
ELSECUNDO
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 11
Reasons to Offer Deferred Fees
Support and
encourage
development
Improve their cash
flow during the
construction phase
City delivers
solution -oriented
customer service
L
Attract and facilitate
new businesses
2/18/2025 City of El Segundo 1 350 Main St. El Segundo, CA 90245 12
CITY OF
ELSE GUNDO
Questions?