Thursday, March 31, 2011

Trib: Mt. Lebanon High School inspection fees create impasse

Mt. Lebanon commissioners are weighing whether to waive more than a half-million dollars in inspection fees for the high school renovation project, but could not reach a consensus this week.

Calculated by the size of the construction project -- capped at $113.27 million -- the municipality would charge the school district $587,000 in fees for the services of its two building inspectors, who would regularly visit the construction site to check everything except the plumbing and electrical systems.

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30 Comments:

Anonymous Anonymous said...

The $587,000 is for more than the services of its two building inspectors.
The author of the article changed horses mid-stream in that sentence.
David Huston

March 31, 2011 9:59 AM  
Blogger Bill Matthews said...

The Building Permit fee is an old issue that should have been settled long ago, based on facts and when the Municipality considered the fee schedule in December 2009 or 2010.

March 31, 2011 1:53 PM  
Blogger Matthew said...

It matters because the 587k, if not charged, would be able to go towards the construction cost of the school. If the municipality charges the school board then the school board has 587k fewer dollars to spend before they hit the 113.27 million cap.

Translation, by not charging, they'll be able to "exceed" the cap by 587k.

The cap is there for a reason; let's not make it easy to circumvent.

March 31, 2011 11:16 PM  
Anonymous Anonymous said...

Is the inspection fee forgiveness another way of authorizing cost overruns, even before the groundbreaking ceremony that occurs during business hours? David Huston

April 01, 2011 8:20 AM  
Anonymous Kim Ressler said...

I admit I should do some research here, but were there no such fees in effect during the elementary school renovations? And since everyone is invoking the 113.27M cap number, are the fees based on the projected cap of the project and not on actual costs? Are costs of the project that do not affect permit issues still factored in?

April 01, 2011 9:32 AM  
Anonymous Anonymous said...

Help me understand something. Let's say the actual cost to the Township to perform the required inspections is $250,000 and the Commissioners agree to charge only that amount. Isn't that a win-win? The cost of the school project is reduced and the Township is not out of pocket.

Now if someone were to tell me that the Township's budget for this year was based on our receiving a $587,000 fee, then I would agree that that creates a problem.

Why not work together in an effort to reduce the costs for everyone as long as no one gets shortchanged? Isn't that good for everyone, regardless of where you stand on the project? I'm not sure why we would argue for our in house inspectors to make a profit off of this work, especially when it comes out of our own pockets. Isn't that somewhat self-defeating?

Dave Franklin

April 01, 2011 10:05 AM  
Anonymous Anonymous said...

The fee schedule that now applies to the HS project was established in late 2008, effective 2009, specifically for the HS, and was an added amendment to what had been and remains the fee bases for a project under $50 million or 200,000 SF....please note the HS fee is the LESSER of the alternate fee bases, while the fee for an under $50 million or 200,000 SF project would be the GREATER of the alternate fee bases....the HS project is already getting a *discount* or special consideration. For single family residential addition/renovation projects, the permit fee is also the GREATER of the two fee calculation bases.

This should have been formally and publicly addressed and settled at least a year ago....it's yet further evidence of a lack of District competence.

Bill Lewis

April 01, 2011 11:41 AM  
Anonymous Anonymous said...

I agree that this should have been resolved long before now. It seems that the two governing bodies have spoken more in the last few months than in the past few years. That's unfortunate.

But if these fees are in the HS project budget (and they are) then we should applaud an effort to reduce the cost, rather than assume it's "another way of authorizing cost overruns."

Are we really going to damn the Board when they don't find savings AND damn the Board when they do?

Rob Gardner

April 01, 2011 12:59 PM  
Blogger Tom Moertel said...

It’s not clear cut that giving the school district an inspection discount is good for the community, all things considered.

For the most part, we have been looking at the situation only with regard to short-term effects on the high-school project. Those are the most obvious effects, of course, and so it’s natural to jump on them, but any change to inspection fees has consequences elsewhere, too.

That is, if the municipality has the choice of demanding full payment, or waiving the payment entirely, or requiring some partial payment in between, which choice serves the entire community best in the long run? Not just the school district, not just the municipality, but everybody. Not just for now, but for the long run, when all of the effects can be accounted for. That’s the question.

Seen in this light, any amount the school district “saves” is the same as the municipality “loses.” Given that taxpayers fund both governmental bodies, it’s a wash, money wise.

But what about policy wise? Consider this: How can the municipality waive some or all of the inspection fees without taking a loss? If it can, it can do so only because collects more fees than it needs; in effect, it overcharges for inspections. But this “overcharging” doesn’t apply uniquely to the high-school project, does it? So, if the municipality offers the school district a discount, on what grounds can it not offer discounts to other organizations?

And if this “overcharging” serves a purpose – to fund other things, for example – what will fund those things if inspection discounts become more common? The taxpayers, most likely. In effect, then, an inspection discount represents a transfer from the taxpayers to the organization getting the discount.

In this particular case, the organization getting the discount is taxpayer funded, so, as I wrote earlier, this one transfer is a wash – the money would be taken from the taxpayers in any case. But it won’t always be so. Other organizations need inspections, too. And if giving the school district a discount now makes it easier for those organizations to get discounts tomorrow, those discounts will probably come at the taxpayers’ expense. And, long term, that’s probably not in the community’s interest.

So, all things considered, how is this discount good for the community?

April 01, 2011 2:15 PM  
Anonymous Anonymous said...

Tom

All good points. It only benefits the community assuming:

1) The inspection (obviously) gets executed well

2) The Municipality hasn't already budgeted to receive the funds (or budgeted to receive them over 3-4 years)

3) The Municipality can execute a fee-free inspection without curtailing revenue-generating activity

It's doubtful that a business or developer could point to this inter-governmental concession as the basis to ask for the same treatment.

Rob Gardner

April 01, 2011 5:00 PM  
Anonymous Anonymous said...

Mr. Gardner, did you listen to the podcast?
During the discussion session, Mr. DeIuliis voiced his concern that one of the other two Mt. Lebanon high schools could expect the same treatment.
When Keystone Oaks or Seton-La Salle starts a renovation project, they will also expect municipal inspections below market rate.
Can our municipality afford it?
It's an issue of fairness.
Our municipality has already extended preferential treatment to the Mt. Lebanon School District regarding the parking issue.
Are you going to tell me the District has more parking spaces now than it did before the the shared parking agreement was executed?
Do you think the municipality would go along with the same kind of shared parking agreement with anyone else?
David Huston

April 02, 2011 8:28 AM  
Anonymous Anonymous said...

Did anyone who may have taken the time to follow my advice and look up past PJ Dick cost estimate updates for the HS project note that PJ Dick has been estimating building permit costs at $856,000 ?

Bill Lewis

April 02, 2011 9:33 AM  
Anonymous Anonymous said...

Mr. Huston, I'd gladly accept $2-300,000 in discounted inspection fees from both KO and SL should they ever decide to undertake big construction projects. Let's face it, 6 figure inspection fees are found money for the municipality any way you look at it. Why be penny wise and pound foolish?

Dave Franklin

April 02, 2011 11:04 AM  
Blogger Tom Moertel said...

Rob,

Thanks for your response.

When the municipality collects fees, taxes, and so on, it uses that money to provide goods and services to the community. The question is: Are those goods and services worth the money?

If they are, and if the school district doesn’t pay its full share for them, the balance will be passed on to the community, either in higher taxes or reduced benefits, and the community will lose something it values or, at best, break even. (Do the math and let me know if I’m mistaken.)

The only way, then, to believe that this discount benefits the community is to also believe that the municipality wastes some or all of the inspection fees it collects on things that aren’t worth buying. If that’s what you believe, fine; but if that’s what the municipality believes, what business does it have charging anybody for those things?

That’s the heart of the issue: If the municipality grants the school district a discount, it’s effectively admitting that it collects more in fees than it can put to legitimate use. And, once it does that, why isn’t everybody going to demand the fair price instead of the demonstrably excessive fee?

The issue has nothing to do with being an “inter-governmental concession” and everything to do with whether the fees buy things worth buying. If they do, then everyone should pay the full fees; if they don’t, nobody should.

Cheers,
Tom

April 02, 2011 12:32 PM  
Anonymous Anonymous said...

Tom

I do understand your point. But let me play Devil's Advocate for a moment:

The municipality runs much like a business. As General Manager of a multi-million dollar global business, I can tell you that it's not unusual for a highly valued customer to get concessions others do not receive. Not to the point where the business loses money. But to a point that creates Good Will. It is an investment in the relationship between the valued, loyal customer and the business. In the end, it normally leads to better relations, more business, and a stronger bottom line in the long run.

In this case the customer is not the District. It is the taxpayer.

But there are 2 "hearts" to this issue.

The other was my original point: if we can agree on nothing else, I hope we can agree that the effort to find cost reductions is to be applauded, rather than met with suspicion.

Thanks

Rob

April 02, 2011 1:14 PM  
Blogger Matthew said...

Rob,

I'd agree that efforts to find cost reductions should be applauded if I were to actually see multiple efforts to find cost reductions. But I haven't seen that. The board seems bound and determined to push through a Rolls Royce high school regardless of the thoughts and opinions of the voters. If they truly cared what the voters thought, they would allow it to go to a referendum. But they haven't.

Since I haven't seen these efforts, I'm going to meet them with suspicion. There IS NO COST REDUCTION HERE. The taxpayer is going to have to pay the fees regardless, either through their city tax or their school taxes. But, as I indicated earlier, if the taxpayer pays via the city tax, that "frees up" 587,000 in the school budget that'll simply be spend elsewhere. If it's by school tax, then the school district will be forced to spend 587,000 less on the school project in order to pay these expenses.

Thus, if the tax payer truly is the ultimate customer, why make it easier for the school to spend an extra 587,000?


As I already said, The cap is there for a reason; let's not make it easy to circumvent.

April 02, 2011 3:46 PM  
Blogger Tom Moertel said...

Rob,

Thanks again for your response. You have a different take on things, and I appreciate the fresh perspective.

However, I’m not sure you do understand my point. You keep suggesting that the community will get something worthy of generating “good will,” but I don’t see how. If you do the math, you’ll note that the net “savings” to the community for the discount is less than or equal to zero. (Don’t forget to account for the value of the things the municipality would have provided to the community had it collected the full fee.) If there are no savings, or if there’s a small loss, where does the good will come from?

Nevertheless, I agree that issues ought to be judged on their merits, not on preconceived notions about the people behind them.

Cheers,
Tom

April 02, 2011 6:09 PM  
Blogger E. T. Gillen said...

As Bill Lewis pointed out, the inspections fees are $269,000 less than what PJ Dick estimated. When we were asking the School District to scale back the project, we weren't asking the Municipality to take it on the chin. As far as it coming out of the same pocket, the School District never even gave that a thought when they took the Municipality to court over the Zoning Hearing Board decision, did they? "Working together" is not in their vocabulary. The Municipality moved their conflicting Monday meetings to Tuesdays and the School Board scheduled meetings on those Tuesdays. Did the School Board work with the CAC? Did the School Board work with the chair of the Audit and Finance Committee when it came to his findings? Did the School Board listen to Judge James' recommendations?

Like everything else involving this project, the School District didn't do its homework. This should have been worked out a year ago. So let's have a groundbreaking ceremony planned before the bids come back. The School District is going to be making some serious decisions when it comes to deduct alternates.
Recommended Deduct Alternates
If they scale back the project, won't the inspection fees come down too?

I know I am going to hear some people say that I am not moving on. But there is a difference between moving on and being bullied by the School Board every step of the way.

April 02, 2011 6:46 PM  
Anonymous David Brown said...

I have to agree with Tom on this one. The money is already in the budget, so what's the big deal? It doesn't seem to be worth making an exception. Plus, if it's the taxpayers' money either way, then it truly doesn't matter what the fee is. But of course there are some differences, so just following the fee schedule is the proper thing to do. It would set a bad precedent. Someone is bound to get their lines of responsibility crossed as a result.

Anyway, the construction bids are due soon. Those results stand a good chance of making this debate moot, one way or another.

April 04, 2011 12:25 AM  
Anonymous Anonymous said...

Tom
I do understand and I still disagree. I think I can respectfully do both.

I had a chance to confirm with Dan Miller that these fees are not reflected in the Municipality's 2011 budget.

Furthermore, the fees the Municipality charged itself when we built the Municipal Building and remodeled the library were exactly $0. Still...the inspections were done, they were done well, and the work did not cause the Municipality to lose other revenue-generating inspection jobs. The people whose salaries are paid by our taxes... the inspectors... did the inspection for us for free.

Unless there is a legal reason why this can't be done for the school project (there may be?) I think it makes sense to try and either save this money or put it back into the District in a meaningful way (not to spend more on the project...we all agree on that).

Anyhow...just another perspective (albeit a lonely one).

Thanks

Rob Gardner

April 04, 2011 5:03 PM  
Blogger Tom Moertel said...

Rob,

I understand (and respect) that you can believe the proposed discount will provide savings to the community. But that doesn’t mean your belief, when checked, matches reality.

Can you do me a favor and just do the math? Show me how there are any real savings here.

You seem to be under the impression that inspection fees are used only for literal inspections. In reality, they are used to bring money into the municipality for lots of things. Just like fishing fees pay for more than just the cost of producing fishing licenses, inspection fees pay for lots of things the municipality does in general.

Once you recognize this fact, you must augment your mental balance sheet to account for the value of the goods and services lost to the community because of the reduced fee revenue. Presumably, those goods and services are more valuable to the community than the fees that fund them; if they weren't, the fees wouldn’t be collected in the first place. Therefore, to reduce those fees is to take from the community things it values more than the fees.

In sum, it’s a net loss.

I know you believe otherwise, and that’s why I want to see your math. Once you express your beliefs in a language that forces you to be consistent, I’ll be able to show you where your logic left the rails. And, if I can’t, then I’ll be able to see where my logic left the rails. Either way, the conversation moves forward, and we all learn something.

Let’s see the math.

Cheers,
Tom

April 04, 2011 6:11 PM  
Anonymous Anonymous said...

Tom
Here's my thinking expressed mathematically:

HS Project Fee Budget $587
Expenditure If Waived $0
Net Savings/(Loss) $587

Muni Budgeted Fee Revenue $0
Fee Revenue If Waived $0
Net Savings/Loss $0
Net Savings to Community $587

But then...what if we did pay the Municipality?

HS Project Fee Budget $587
Expenditure $587
Net Savings/ (Loss) $0

Muni Budgeted Fee Revenus $0
Fee Revenue $587
Net Savings/ (Loss) $587
Net Savings to Community $587

So where we can agree that it's a "wash" either way, I'd rather have a savings in the budget that has future hurdles (PSSER's, the next bond issue) than a surplus elsewhere. I'd prefer the District get a reduction to pocket OR put towards programs OR (maybe best of all) put in a maintenance fund for the other schools.

It just doesn't make sense to me to have one taxing body charge another when we didn't charge ourselves for the other construction jobs in this community.

And I really don't care if that's unfair to KO. Their taxes don't pay the salaries of our inspectors.






Thanks

Rob Gardner

April 04, 2011 7:19 PM  
Blogger Tom Moertel said...

Rob,

Thanks! Those figures clear a lot up.

Now that you’ve shown the math, I trust you’ll agree there are no savings. The discount represents a transfer from the municipality to the school district. What is transferred is not the cash value of the discount but the goods and services that the cash would have purchased. In effect, the discount trades municipal goods and services for school goods and services.

And that’s what you were missing when you wrote, “It just doesn't make sense to me to have one taxing body charge another when we didn't charge ourselves for the other construction jobs in this community.” When the municipality collects money from itself, or when it waives such collections, there is no corresponding transfer of goods and services. What is provided to the community either way is exactly the same. So there’s no question of whether the transfer is good or bad: it has no effect.

Not so for a transfer from the municipality to the school district. In that case, municipal goods and services are exchanged for school goods and services. The exchange rate, however, isn’t even; it’s set at the relative efficiency of the school district with respect to the municipality. If the school district doesn’t make each dollar as far as the municipality, the exchange represents a net loss to the community.

Do you believe the school district makes its money go farther than the municipality? I don’t. (And I suspect most taxpayers would agree with me on that point.) That’s why I think the discount is counterproductive.

That it potentially sets a precedent is another reason not to offer it.

Cheers,
Tom

April 04, 2011 10:04 PM  
Blogger Tom Moertel said...

What I meant to say in the last sentence of the fourth paragraph above was this:

If the school district doesn’t make each dollar go as far as the municipality, the exchange represents a net loss to the community.

Sorry about any confusion the error may have caused.

April 05, 2011 1:36 AM  
Anonymous John Ewing said...

The Municipality’s problems are not being properly addressed because of a lack of proper funding. Before more dollars are committed to the District the Municipality must address their problems. Let’s look at just three problems that have not been properly funded by the Commission:

1) There is a three-year backlog of trees between the sidewalks and the streets that need to be removed and replaced by the Municipality.

2) Tree roots grow under sidewalks and create different levels and folks trip on the sidewalks and fall. These sidewalks need to be fixed.

3) We have about 75 miles of roads that need to be replaced every 25 years but only one mile of repair is funded by the municipal operating budget so we need a total of three miles in the operating budget to maintain basic municipal roads – unless we want streets like the City.

In short choices have to be made by the District and the Municipality. It is time to stop advocating that all the money should be spent on kids because that is not responsible government. The District needs to pay the fees being charged and the Municipality needs to put the money to work properly solving municipal problems; otherwise, we need new C Commission and District leadership.

April 05, 2011 1:43 PM  
Anonymous John Kendrick said...

Didn't the same commissioners tell us that the decision to move forward with the Shared Parking Agreement was an "arms-length transaction" that would be in the best interest of the municipality?

Then the question on my mind is, "Why waive the inspection fees?"

Unless of course we've all been watching a big fat sham that was designed to give the illusion that the municipality and the school district are not one in the same.

April 05, 2011 3:43 PM  
Anonymous Kim Ressler said...

So, the thinking seems to be that rather than raise money for needed repairs to streets and sidewalks and such through the unpopular options of either the raising of municipal taxes or cuts to other budget items, we should instead make a profit from the school district by charging them fees that will be paid by their tax increase or budgetary cost-savings elsewhere? Why was Dave Franklin's suggestion of the school district paying the COST of the inspections bypassed in the discussion? The municipality should not have to take any kind of hit in this matter, and I am sure the inspector's time will not be insignificant. But the idea of one taxing body justifying the making of a profit from another sticks in my craw. The two government entities are not the same, but neither should they be at cross-purposes to one another. I have read many complaints about lack of communication and cooperation - here is a golden opportunity.

April 05, 2011 7:30 PM  
Anonymous David Brown said...

What is the underlying reason that the School District and the municipality were created as separate entities? If we understand that reason, then I think the proper answer to today's question will be obvious.

April 05, 2011 10:46 PM  
Blogger Tom Moertel said...

David Brown: Bingo!

April 06, 2011 1:06 AM  
Anonymous Anonymous said...

OK. You guys convinced me. I'm wrong on this one. The District should be charged whatever the fair value of the inspections are.

Rob Gardner

April 06, 2011 11:22 AM  

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