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HomeMy WebLinkAboutStudy Session Agenda Packet 01-22-2018 SPECIAL STUDY SESSION AGENDA CITY COUNCIL CITY OF WHEAT RIDGE, COLORADO 7500 W. 29th Ave. Wheat Ridge CO January 22, 2018 Upon adjournment from Regular Council Meeting Individuals with disabilities are encouraged to participate in all public meetings sponsored by the City of Wheat Ridge. Call Sara Spaulding, Public Information Officer 303-235-2877 at least one week in advance of a meeting if you are interested in participating and need inclusion assistance. Citizen Comment on Agenda Item 1. Contract Building Division Services ADJOURNMENT Memorandum TO: Mayor and City Council FROM: Kenneth Johnstone, Community Development Director THROUGH: Patrick Goff, City Manager DATE: January 12, 2018 (for January 22, 2018 Study Session) SUBJECT: Contract Building Division services ISSUE: The City has historically contracted with an outside professional services firm to provide a portion of the City’s building division customer service functions related primarily to building inspections. When the building division has been fully staffed, at a minimum, this outside contract firm has provided coverage for staff absences for vacations and trainings. Additionally, the outside firm provides technical expertise in areas such as commercial electrical inspections, which the City has not always been able to provide with in-house staff. Complex building permit plan reviews have also frequently been outsourced to our outside contract firm. For several reasons explained further below, the City is currently negotiating with our contract inspection firm, Charles Abbott and Associates to provide full service building division services. In other words, the City is looking to fully outsource our building division staffing to function effectively as an extension of City Staff. PRIOR ACTIONS: The contract for building division professional services is periodically put out to public bid and most recently, in early 2017, the City awarded that bid to Charles Abbott and Associates (CAA). Charles Abbott and Associates has been functioning in this role since April 2017, starting with the City just weeks before the May 8 hailstorm. Because of the abrupt timing of the departure of our previous contract firm and the onslaught of permits and inspections associated with the May 8 storm, it was not possible to finalize a long-term contract with CAA when bringing them on board in mid-April and they have been providing services to the City under an interim Letter of Agreement. BACKGROUND: As noted, the City has always had a need to maintain a contract professional services firm to provide a portion of the City’s customer service functions of the building division within the Community Development Department. The building division provides four (4) core functions: contractor licensing, building permitting and associated plan review, building inspections and hotel/motel inspections. The building division also provides support to other departments/divisions in regards to business licensing and code enforcement. Study Session – Contract Building Division Services January 22, 2018 Page 2 2 Historically, the amount of work outsourced to our contract firm has ebbed and flowed based on our work volume and level of internal staffing. When internal staff positions have been vacant or specialty technical skill sets have been absent in our internal staffing, we have relied more heavily on our contract inspection firm to provide building division services. As City Council may be aware, it has been challenging to keep our building division fully staffed over the last several years. The pool of qualified candidates for building inspector positions is limited and the profession has not been adequately replacing itself. Similarly, the pool of qualified Chief Building Official candidates is extremely limited and as a result, it has been challenging to recruit and retain individuals in that position. As a result, the CBO position has been vacant for extended periods over the past 3 years. Lacking a permanent CBO also makes recruitment and retention of other building division staff (Permit Technicians and Inspectors/Plans Reviewers) more difficult. We have attached an article that highlights the issue of the building inspection profession not adequately replacing itself and illustrating it is an aging work force. The model of fully out-sourcing building division services is certainly not without precedent in the Denver Metro and Front Range area. Centennial has long fully out-sourced those functions; Denver also outsources a portion of these functions. Small communities like the Towns of Bennett and Lyons fully outsource and most of the mid to large Denver metro communities out-source a portion of these functions to be able to more quickly respond to ebbs and flows in permit and inspection work volumes. For these and other reasons, the City is pursuing a long-term contract with Charles Abbott and Associates to provide 100% of our building division staffing as a seamless extension of the Community Development Department staff. It should be noted that CAA provides full service building division services to the majority of their clients, many of whom are based in California. In checking references as part of the process of selecting CAA in early 2017, we received very positive feedback about CAA from several of those clients that they fully service. Many of their clients have used CAA for over 20 years. Staff believes the outsourced building division staffing model has the strong potential of improving customer service, for the following reasons: • CAA has a strong customer service ethics and provides regular training for their employees in that regard • CAA has a depth of well-trained staff resources who are able to deliver high quality professional services from the first day they are assigned to the City; no training is required as would otherwise be the case when the City hires new team members • CAA has an ability to rapidly adjust the amount of staffing as work volume ebbs and flows, ensuring the City always has adequate inspectors and permit techs to meet changing demands As a practical matter, because of the significant staffing needs resulting from the May hailstorm, CAA has been functioning almost like a full service building division contract firm over the course of much of 2017. On a daily basis, CAA has provided as many as 6 inspectors and 3 or 4 Study Session – Contract Building Division Services January 22, 2018 Page 3 3 permit technicians to augment City staff at the peak volume of work flow associated primarily with residential re-roof permits resulting from the May 8 hailstorm. CAA has also conducted a large percentage of building permit plan reviews. The City was fortunate that CAA had sufficient staff resources to meet the City’s needs and has been providing staff from as far away as Georgia, Nevada and California. CAA has been absorbing costs associated with car rentals, hotels, per diems, etc. with these employees who are based in these remote locations. FINANCIAL IMPACT: We are still negotiating the details of the scope of services and fee structure with CAA. Staff received a proposed scope of services and fee proposal shortly before the publication of this staff memo and that is under review. Generally, the fee structure is such that CAA receives the majority of the building permit fees that are paid to the City, exclusive of use tax. Those fees include building permit fees, plan review fees and contractor licensing fees. The proposal is that CAA would receive 68% of those fees, meaning that the City still receives 32% of the fees, which will cover staff administrative costs for other Community Development staff who are involved in a more minor way in processing building permits and conducting inspections. The contract will be structured in a manner whereby when building permit revenues exceed certain thresholds in any given month, the percentage portion of what is shared back with CAA will be reduced slightly (from 68% to 60% when revenues exceed $60,001/month and from 60% to 55% when revenues exceed $100,001/month), in recognition of some efficiencies they are able to achieve as work volume increases. It is of course important to understand what the anticipated impact will be to the City’s General Fund (GF) budget, which is where all building permit revenues are allocated and from where all current building division expenses are paid. To that end, staff has looked back at past years to analyze and compare the CAA proposed pricing structure relative to the actual building division budget. • In 2014, building division revenues (exclusive of use tax) totaled $1,010,285. Sixty-eight percent (68%) of that would equate to $686,994. In 2014, building division expenses, which includes salaries, benefits, training and meeting expenses, etc., were approximately $495,330, so the fully outsourced model being proposed would have an approximate $191,664 negative impact on the City’s general fund. • In 2015, building division revenues (exclusive of use tax) totaled $1,006,882. Sixty-eight percent (68%) of that amount would equate to $684,680. Building division expenses in 2015 were approximately $591,081, so the outsourced model would have a negative GF impact of $93,600. • In 2016, building division revenues (exclusive of use tax) totaled $857,151. Sixty-eight percent (68%) of that amount would equate to $582,863. Building division expenses in 2016 were approximately $627,062, so in this year, the outsourced model would have had a positive GF impact of $44,200. These raw revenue and expense figures do not factor in City expenses related to vehicles, mobile phones, Surface Pros, etc., all of which would be fully covered by CAA per the terms of the proposed contract. These figures also do not factor in staff time and expense associated with Study Session – Contract Building Division Services January 22, 2018 Page 4 4 recruiting and training new building division staff. Finally, these figures do not account for the reduced percentage share back that would occur in months where certain building division revenue thresholds are exceeded, as explained on the bottom of page 2 of this memo. On balance, staff feels this outsourced model will generally be revenue neutral and any potential additional expenses are outweighed by what we believe will be an improved customer service deliver model. RECOMMENDATION: While this change in business model is an operational change generally in the purview of the City Manager’s office, staff felt it was a big enough change that we wanted to brief Council prior to bringing forward a contract for City Council’s review and approval. We also want to assure Council that we are sensitive to our customers perceiving this change in a positive light. To that end, we will ensure that in moving to this contract services model, the customers of the building division will perceive CAA staff to effectively be an extension of City staff. One final important note would be that all current employees of the division (two permit technicians and one combination inspector) will be offered full time employment with CAA with a salary and benefit package commensurate with their compensation package currently with the City. PROPOSED NEXT STEPS: Staff is intending to have a contract presented for City Council action in February or March. ATTACHMENTS: 1. Article on building inspection profession ATTACHMENT 1