Committee of the Whole

City of Oconomowoc Committee-Of-The-Whole Tuesday, September 17, 2019 - 6:40 PM City Hall - Conference Room 3 (or immediately following Protection & Welfare) Notice: If a person with a disability requires that the meeting be accessible or that materials at the meeting be in accessible format, call the City Clerk at least 48 hours prior to the meeting to request adequate accommodations. Tel: 569-2186. 1. Call to order and confirmation of appropriate meeting notification 2. Committee Business a. Presentation on Proposed 2020 City Budget b. Discuss Building Inspection Services 3. Adjourn ________________________________ Diane Coenen, City Clerk City of Oconomowoc Notice is hereby given that a majority of the Common Council will be present at the above scheduled meeting to gather information about a subject over which they have decision-making responsibility. This constitutes a meeting of the Common Council pursuant to State ex rel. Badke v. Greendale Village Board, 173Wis. 2d 553, 494 N.W. 2d 408 (1993) and must be noticed as such, although the Common Council will not take any formal action at this meeting. 1  MEMORANDUM PUBLIC WORKS Date: September 13, 2019 To: Committee of the Whole From: Sarah Kitsembel, City Administrator Mark Frye, Director of Public Works Re: Building Inspections Services RELATES TO THE STRATEGIC PLAN Strategic Plan Goal V. Enhance the Effectiveness of our City Government 1. Develop/Update/Maintain City Ordinances/Policies 3. Review & Analyze Building Inspection Services BACKGROUND As part of the strategic planning process the Council identified the desire to review how to provide the City’s building inspection services. This item was scheduled for review in the third quarter of 2019 in the strategic plan. The Council requested staff to perform an analysis of bringing the inspection services in house and compare that to contracting to determine if there is a potential cost savings. The City currently contracts for building inspection services. This building inspection division is responsible for enhancing the public safety by enforcing construction codes while processing building permits, occupancy permits and performing residential and commercial inspections to support development in the community. The types of permits issued include new construction and remodels for residential and commercial building permits, HVAC, plumbing, electrical, garage, roof, fence, pool, deck, shed, siding etc. Our current contract for building inspection services provides the City access to certified building inspectors for both residential and commercial development in the City. The fee paid to the contractor is based on a percentage of building permit revenue collected. The contractor is paid 60% of revenue collected and the City retains the other 40%. The City’s current contractor has seven inspectors within the company and serves 24 communities. ADDITIONAL ANALYSIS Building construction activity is cyclical in nature and is impacted by the health of the economy. When analyzing services, it’s important to take a long term view to incorporate trends of healthy and poor economic conditions. For the purpose of this analysis, we have included data back to 2008 when the United States entered a recession. 1 2 Below is a chart of building permit revenue from 2008-2018 for the City of Oconomowoc. The chart includes the gross revenue collected and the amount paid to the contractor (60%) and net revenue to the City (40%). Gross Building Permit Revenue $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- 08 20 20 20 09 10 11 12 20 20 13 20 20 20 20 20 20 14 15 16 17 18 Following is a chart that shows the history of the number of permits pulled from 2008-2018. The building inspectors perform inspection and re-inspections for various Number of Inspections Performed permits pulled. A typical new residential 7,000 home may have up to 25 different 6,000 inspections during the construction (not 5,000 including re-inspections). Occasionally on small residential projects the inspector 4,000 may be able to do multiple inspections 3,000 during one visit. 2,000 The chart to the right shows the history of 1,000 inspections performed in the City of 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Oconomowoc. The numbers also include Series1 4,886 3,769 2,498 3,427 3,344 3,594 4,057 4,498 5,443 5,544 6,325 inspections for compliance, property maintenance issues, liquor licenses, special events and school activities. 2 3 FINANCIAL IMPACT The City’s contractor currently averages about 75 hours per week working in the City of Oconomowoc. The time per week varies depending on the construction activity in the community. In addition to their fieldwork performing inspections, their work includes office time, fielding phone calls, code research, customer walk-ins, paperwork and reporting. The Building Inspector may be called in after hours or on weekends to do inspections of projects or respond to an event such as a fire etc. Based on the history of activity in the City, we believe that at least 2 employees would be needed to replace the contracted services. In addition Building Inspectors must hold certain certifications to inspect the various components of residential or commercial construction and it’s unusual to find people that hold certifications in all areas. Therefore the City would also need at least 2 employees with the complementary certifications. Building Inspectors are required to hold the following certifications (UDC=Uniform Dwelling Code): UDC Construction, UDC Heating, UDC plumbing, UDC Electrical, Erosion Control, Commercial Building, Commercial HVAC, Commercial Plumbing, Commercial Electrical. In analyzing the cost to bring these services in house there are a number of factors to consider. Costs include the wages and benefits of the employees, overtime, certifications, training/code updates. Other ongoing costs would include vehicle/mileage and cell phone. The City’s Human Resources Department surveyed other communities to determine a market wage range for Building Inspector positions. Based on this survey the average wage would be around $32.89/hour or $68,411/year. Including benefits the annual cost of a Building Inspector would be approximately $97,300. In addition the HR Department did some research on the labor market for Building Inspectors. Like many other skilled trade positions, the market is very competitive currently. The League of Wisconsin Municipalities printed an article in February 2019 of employment trends from their website. Building/Plumbing/Electrical Inspectors were ranked #2 in the most posted positions in 2018 and ranked #3 in the posting most likely to have deadlines extended and/or salary range increased. The market wage of $32.89/hour used for this analysis is a fair and conservative estimate, but depending on the competitive labor market and pool of candidates, the City may need to hire at a higher wage rate. Below is a chart of the estimated annual cost of one Building Inspector. Factoring in wages/benefits, overtime and other costs, a conservative estimate is about $114,000/year. 3 4 The following chart analyzes the costs of contracting vs. 2 in house employees using the City’s historical data back to 2008. The City currently only pays the building inspector contractor if a permit is issued, the amount paid to the contractor is 60% of the price of the permit. The other 40% of the permit revenue is retained by the City and is used to offset other costs/levy in the City. Comparison of Net Building Permit Revenue City Contract vs. In House 2 FTE's $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- $(100,000) $(200,000) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Gross Permit Revenue Net Revenue to City (Contract Services 40%) Net Revenue to City (2 FT Employees) $0 As noted earlier, the cyclical nature of the economy impacts the revenue collected by the City. The chart above demonstrates the risk the City may face in slower economic periods if using in house staff – permit fees may not cover the full cost of the employees during those periods. In the scenario of contracting services, the City only pays the contractor when a permit fee is paid. If there’s no permit revenue, there’s no payment made which insulates the City from risk of slower economic periods. Looking at the last 11 years overall, the City would have lost about $85,000 having 2 employees in house vs. contracting the services. 4 5 RECOMMENDATION Council requested staff to complete a financial analysis of contracting building inspection services versus bringing them in house. Based on the financial analysis completed above staff recommends continuing to contract for building inspection services. SUGGESTED MOTION Discussion item, no motion needed. Attachments: 1. Building Inspection Contract 5 6 7 8 9