City manager: New inspection system coming; old fees to be forgiven

City Manager Kent Cagle sits down to shed light on the developer fee increases.
Kevin Limiti | Herald

The Killeen city manager gave some insight into controversial building inspection fee increases in the proposed 2024 budget, discussed heatedly at recent Killeen City Council meetings.

In an interview with the Herald on Thursday, City Manager Kent Cagle confirmed that some of the building inspection fees were not being collected. He said the city was going to prevent this in the future.

Cagle also said the city doesn’t plan to go after fees not paid by developers in the past.

MISSED COLLECTIONS

“Part of the problem is we have employees scattered across the city,” he said. “And so the primary point for collecting development fees is at building inspection. So if you’re going in for a building permit, we know we were collecting all of those, because you’re going right there — to building inspection — to get a permit.”

But he said the situation was different when developers were submitting subdivision plans.

“I completely believe this is all unintentional — and it doesn’t matter because it’s our fault no matter what,” he said. “People would go to engineering at a completely different building, pulling in different parts of town and submit plans. We’d start reviewing and start working on them, never checking to see if they stopped by building inspection to pay the fee.”

He said the city found this had happened “a few times.”

“We didn’t go back many years. We just went back some to see what‘s going on here,” he said. “And we were able to determine that and so we’re putting procedures in place to keep that from happening ... but when we go completely live with MyPermitNow (an online filing system used by city governments), it’s all going to be electronic and it will all be tracked.”

The city issues thousands of permits per year for a variety of big and small construction projects.

From Jan. 1 through July, the city issued 276 permits for new single-family homes. There were about 500 such permits in 2022, and nearly 600 single-family home permits in 2021.

FEE INCREASES

The fees for building inspection were raised in the proposed 2024 budget, to the ire of some local developers.

However, Councilman Jose Segarra on Aug. 1 made a motion of direction to slash the fee hikes in half for the subdivision inspection fees. As a result, developments between 10 to 50 acres would incur a $10,000 inspection fee, up from $5,000 under the current fee structure. Cagle originally had called for a $15,000 fee in his proposed fiscal year 2024 budget, which the council is expected to vote on next month.

On Tuesday, the council voted to return the smaller fees to their original proposed rates, but to keep the larger fees — such as the subdivision inspection fees — with the reduced increase per Segarra’s proposal.

AUDIT

With problems in the past of collecting the fees — which is essentially taxpayer money once the fees are collected by the city — the Herald reached out to the City Council members about whether the city has considered conducting an audit on the developer fees.

“It might be a good idea for someone on the audit committee to submit that,” Segarra said Thursday. “It shouldn’t take that long to do.”

He said doing an audit was “part of the process ... improving some of the things that need improving from the past.”

“They’re always looking for recommendations,” he said of the Audit Committee.

However, Councilman Ramon Alvarez, who is on the Audit Committee, said that the short answer as to whether the city would conduct an audit of the inspection fees was “no.”

“Reasoning being we have not yet had an Audit Committee meeting since this topic came to light,” he said in an email to the Herald. “I’m certain that will be a topic of discussion, among others, at our next or future Audit Committee meeting, though.”

Councilman Riakos Adams, on the other hand, said that he was considering asking for an audit of the inspection fees.

“Somebody might beat me to the punch and put it on the agenda,” he said

Adams said the other council members were surprised when the council discussed the inspection fees.

“Since it’s been brought up, it does need to be addressed,” Adams said.

Councilwoman Jessica Gonzalez also said the council was discussing it.

“We actually have had that conversation and I think that’s something that is on the table,” she said. “We didn’t know this was an issue until it was presented to us.”

Mayor Debbie Nash-King said she didn’t see a need for an audit because the fees that weren’t collected are not part of the city’s budget.

However, an internal audit by City Auditor Matthew Grady is something that could happen, if the council approves it, the mayor said.

“That was a mishap. Whatever the problem is, we have to fix it,” she said.

Councilman Michael Boyd could not be reached for comment. Newly elected Councilman Joseph Solomon said he was not sure about the process.

Mayor Pro Tem Nina Cobb said she would reply if the Herald sent an email, but did not respond by deadline.

END GOAL

Cagle said the goal of raising the inspection fees is so that the city breaks even. He said it wasn’t normal for the city to incur a loss from the fees. And state law prohibits a city from making a profit from the fees.

Even with the full proposed increase factored in, the city wasn’t recouping the cost of services rendered from the inspection fees. The proposed budget had estimated the loss at $145,971.75 in the development inspections category.

From now on, he said, they are going to recommend that the inspection fees are going to be voted on as a separate ordinance in the interest of transparency.

“We have some guidelines that in the past said the city manager could raise the rates up on any of our fees to the benchmark average,” he said. “And we were a long way from that — from the benchmark average on many fees, right? But then we had the charter amendment that said fee increases have to have a public hearing “

He said a few years ago, there were fees “scattered around the organization” without an ordinance, which is why the change is being made.

“I think it makes it look a little more transparent,” Cagle said. “I think that’s the goal ... every fee needs to be linked back to an ordinance. And I think it will be better when it’s separate and not included with the budget ordinance.”

He said other services the city provides aren’t expected to break even, such as the library or playground equipment in parks.

“But then, on the other hand, the golf course — yeah, we expect it to pay for itself. The Rec Center doesn’t pay for itself, but we expect revenue to be generated there to offset some of the costs. So I think it just depends on the service and so on,” Cagle said.

“Development fees ... we were a very long way from breaking even, and we were just trying to get a little closer,” he said.

The benchmark averages for the inspection fees calculated by the city included a number of nearby cities and other comparable ones in the state.

Those cities were Waco, Denton, Beaumont, Temple, Amarillo, Abilene, Odessa, Garland, Lubbock, Mesquite, Round Rock, Grand Prairie, Copperas Cove, Harker Heights and Belton.

MOVING FORWARD

Cagle said the average percent for collections should be 100% but didn’t know every time someone got a subdivision review and didn’t pay the fee. But he said there will be no attempts to collect past fees.

Cagle didn’t say how much debt in unpaid inspection fees developers owe the city. The Herald on Thursday sent an open records request to the city for those amounts.

“We’re more concerned about going forward making sure that doesn’t happen again,” the city manager said.

Cagle responded to some of the criticism he and the city staff received at previous council meetings.

“The thing that upsets me a little bit was we were accused of trying to rush this through because so many people just determined — no matter what we said — they determined that we were going to vote on it this past Tuesday,” he said.

Some council members also suggested that there would be a vote on the fee changes in the following council meeting, but Cagle later clarified that they had until Sept. 12 — the final vote — to make any changes.

During this time, there could be a second public hearing on the budget if council members determine that it’s viable.

Cagle said he thought the criticism of a misprint on a city report — which mistakenly had inspection fees labeled as “per acre” rather than “per permit” on the presentation — was valid. “That one was clearly on us,” he said.

But Cagle flatly said he disagreed with local developer Gary “Bubba” Purser when he suggested Tuesday that the city’s numbers on the inspection fees were inaccurate, accusing the city of pulling numbers out of the air.

COUNCIL REACTS

Gonzalez said in an email to the Herald that the city and her fellow council members were “doing our due diligence” to make sure the fees the staff recommended made sense to the public.

“It is my preference, when there is a major increase in a cost to do business or for services rendered, that all parties understand the why, and how this will impact their business and ultimately their budgets,” she said. “The fees are needed; how we get there can be and should be discussed, ideally, to the benefit of all people involved. Understand when we are trying to find balance there are times when we will not be able to please all of the people all of the time, but we will always do our best to make a good decision for our city as a whole!”

Adams wrote in an email to the Herald that the city was not subsidizing developers.

“A subsidy is a grant or gift. I don’t see how an increase in a fee is considered a gift,” he said.

According to the original proposal, subdivision inspection fees for developments between 10 to 50 acres would have incurred a $15,000 fee, up from the previous $5,000 — for an increase of $10,000.

However, a 50-acre development can accommodate 200 homes on quarter-acre lots.

Using that equation, the subdivision inspection fee of $15,000 would average out to $75 per house.

The modified version proposed by Segarra would be a $10,000 subdivision fee, for an increase of $5,000.

Under that fee structure, the cost per home would be $50 in a 200-home subdivision.

Adams said that equation didn’t tell the whole story.

“The proposed $75 increase per new house, when considering the average selling price of more than $200,000, might seem insignificant. However, it’s important we consider the cumulative effect of various costs and how they impact the affordability of housing in Killeen,” Adams said. “While it’s unlikely that this increase alone would deter new home-buying, it’s our responsibility to ensure that the fees are balanced and justifiable. We must continue to make Killeen an attractive place for both developers and home buyers without placing undue burden on either party.”

GOOD BUDGET

The city will hold a budget town hall Thursday Aug. 17 at 5 p.m. at City Hall. There will be no long presentations, Cagle said, but city staff, including department heads, will be taking questions and will try to give detailed answers.

Cagle said he feels good about the proposed 2024 budget.

“We’re doing the best we can with what we have,” he said. “There’s lots of unmet needs, but given all the issues that we’re dealing with, I think it’s a good budget.”