BOARD OF BUILDING AND SAFETY

COMMISSIONERS

HELENA JUBANY PRESIDENT

VAN AMBATIELOS VICTOR H. CUEVAS

SEPAND SAMZADEH

November 13, 2012

CITY OF LOS ANGELES

ANTON IO R. VILLARAIGOSA MAYOR

Council of the City of Los Angeles Planning and Land Use Management Committee 200 North Spring Street Los Angeles, CA 90012

DEPARTMENT OF BUILDING AND SAFETY

201 NORTH FIGUEROA STREET LOS ANGELES, CA90012

ROBERT "BUD" OVROM GENERAL MANAGER

RAYMOND S. CHAN C. E., S. E. EXECUTIVE OFFICER

FEASIBILITY OF A FEE-SUPPORTED ON-SITE SIGN ENFORCEMENT, PERMIT STREAMLINING AND EDUCATION PROGRAM - COUNCIL FILE 10-2259 (CARDENAS, HAHN)

Honorable Members of the Planning and Land Use Management Committee:

On August 13, 2010, the City Council directed the Department of Building and Safety (LADBS) and the Planning Department, in consultation with the City Attorney, to prepare a report regarding the implementation of a nominal fee to administer a Sign Code Administrative Program (SCAP) on all commercial businesses in the City utilizing exterior on-site signage to fund increased sign enforcement; streamline permitting; educate businesses about permitting requirements; and create a temporary amnesty program for unpermitted on-site signs that meet Code requirements.

At its meeting of August 7, 2012, the Planning and Land Use Management Committee received and filed a report dated May 21, 2012, submitted by the Department of Building and Safety detailing streamlining measures that have been put in place in the Department of Building and Safety in response to this motion. At that meeting, the Planning and Land Use Management Committee requested more detailed information on the administration of SCAP enforcement inspections including the cost of a pilot program.

LADBS met on several occasions with representatives of the California Sign Association (CSA), Los Angeles C~amber, Central City Association, Valley Industry and Commerce Association, Building Owners and Managers Association and the New Car Dealers

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Association to discuss the various issues related to SCAP. The CSA, a non-profit organization representing the California on-site sign industry, had several suggestions regarding the administration of this program. SCAP would involve periodic inspection of all the signs for all business in the City that use on-site signage. Even though the number of such business and the number of signs are unknown, it is clear that this would be a very large program that would require a large number of staff and other resources .

For these reasons, it may be prudent to start this proposed program gradually. A Pilot Program may be the best initial step in order to look into the feasibility of implementing SCAP including the number and classification of staff needed and other related logistical issues. The Pilot Program would be paid for by the General Fund. This report further elaborates on the the merit of the Pilot Program and other factors that affect the successful implementation of SCAP.

PROPOSALSBYTHECSA

CSA had some ideas for the administration of SCAP as follows:

• In order to address City concerns regarding the expense of researching each on­premise display, CSA suggested limiting the scope of inspection and level of enforcement to visual inspections by trained inspectors without costly and time consuming permit research. In this manner, only the most obvious illegal signs would be flagged for compliance.

• Add the annual SCAP fee to the annual tax bill that is sent to all businesses registered with the City's Office of Finance as part of the Business Tax Registration Certificate (BTRC) process. This, in recognition that billing and collecting the fee by LADBS is potentially a logistical challenge that would require a great deal of time and effort, in turn driving the cost of the program up.

• Collect the fee in advance, like a year or so, and build up a fund with the money received that would be used to pay for the start-up costs of the program when enough money is collected.

• Establish a 12-month amnestv program during which businesses lacking permits for their signs could apply for permits at no cost or minimal cost. Noncompliance fees and other fees would also be waived.

• Hire a third-partv consultant to perform a fee study and arrive at the amount of the fee necessary for cost-recovery.

• Establish an education program by which LADBS would provide training to business owners and sign contractors regarding the various sign regulations.

Aside from the items listed above, there are additional significant issues that are considered in this report that determine whether a SCAP program would be feasible in the City of Los Angeles.

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EVALUATION OF ISSUES IN CSA'S PROPOSAL AND OTHER ISSUES

Level of Enforcement

The level of enforcement, or how closely each existing sign is scrutinized, is a major factor that would directly affect the number of additional staff and other resources needed to carry out the program. The following two options reflecting different levels of enforcement were discussed with CSA:

Option A

The tightest level of enforcement (Option A) would consist of inspecting the exterior premises of al l of the businesses in the City that use on-site signs and searching permit records to estab lish which signs were erected with a val id permit from LAD8S. The Department would then issue orders requ iring that those signs found to have been erected or modified without a va lid permit be removed or brought into compliance by pulling a permit after-the-fact. Inspection would then be conducted pursuant to the newly issued permits as requ ired by the LAMC. With this option, every sign that is al lowed to remain would have to be linked to a permit.

Option A would require a very large number of inspectors and probably several years to complete. Linking individual signs to the existing LAD8S database of permits which cover a period of over one hundred years would be extremely laborious and would require trained staff to spend thousands of hours researching permits and then linking each existing sign to an existing permit. It cou ld be expected that many permanent and temporary signs cannot be linked to a permit and would have to either be removed or drastically modified or reduced in size in order to comply with current codes to qualify for an after-the-fact permit. Due to the amount of staff and time that would be needed to go with option A, this level of enforcement probably would not be justifiable.

Option 8

An alternate and less laborious level of enforcement, would not ascertain the lega lity of each existing on-site sign but instead, would concentrate on over­population of signs and sign blight. This alternate, option 8, is supported by the CSA.

With option 8, after inspecting the exterior premises of a business in the City, a trained inspector would flag those signs that very likely are illegal based primarily on visual observation. This level of enforcement would likely concentrate on window signs, temporary banners and pole signs that have been appended with additional signs after their original construction and other signs that are likely to be in violation relying on the inspector's knowledge of the sign regulations.

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Option B would not involve an exhaustive research of Department permit records and linking all existing sign to an existing permit in every instance as would be done with option A. However, some research of permits would likely need to be done depending on circumstances. Even though option B is not as laborious as option A, it would still require a large amount of staff and resources.

Whether option A or B is followed, many businesses are expected to be affected by having to remove their signs or reduce their size and obtain permits to legalize those signs that could be brought into compliance with the code. Owners seeking permits to maintain signs built without a permit must comply not only with the Building Code, but also satisfy all land use requirements of the Zoning Code, Specific Plans, Special Districts, etc.

Cost-Recovery Fee Collection (BTRC Option)

Collection of the cost-recovery fee for the administration of SCAP is a major consideration that can be expected to be time-consuming and therefore have great impact on the fee paid by businesses to support this program. As previously mentioned, it is not known how many businesses use exterior on-site signs as part of their business but the number of businesses is likely to be several hundred thousand and the number of signs will be even greater.

Fee collection from such a large group of businesses can be a very large task. Whatever collection method is used should not demand inordinate resources, such as expensive efforts to recover delinquent payments, because the cost of collecting the fee must be included in the amount of the SCAP fee. Additionally, fee collection must be sufficiently comprehensive (i.e., the fee must be collected from a high enough percentage of businesses with on-site signs) that the City can avoid the appearance of discriminatory enforcement or nominal application of the ordinance, or undermine voluntary compliance.

In consultation with the office of the City Attorney, it was determined that the SCAP fee must meet the exceptions listed in Proposition 26 in order not to be considered a tax. Since the passage of Proposition 26, a "tax" that requires voter approval is defined as "any levy, charge, or exaction of any kind imposed by a local government," except as outlined in seven exceptions.

The first exception, set forth in subsection (e)(l), applies when a "charge [is] imposed for a specific ... benefit ... granted directly to the payor that is not provided to those not charged .. . . " Similarly, Subsection (e)(2) excepts a "charge [that is] imposed for a specific ... service ... provided directly to the payor that is not provided to those not charged .... "

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Subsection (e)(3) excepts any "charge imposed for the reasonable regulatory costs to a local government" for issuing licenses and permits and investigating and enforcing them. A Pilot Program would be essential in order to collect the information necessary to make sure that the fee is based on actual data that reflects the reasonable cost to the City for administering SCAP.

To be considered a fee and not a tax, the fee to support SCAP would have to be applied to all businesses that receive the benefit or service of assistance with on-site sign inspection and permitting. Businesses that do not have on-site signs would not derive any benefit from this service and therefore could not be charged with the fee.

To justify the fee amount within the parameters of Proposition 26, the fee should be based on the cost to the City for providing a service directly to the payer. In this case, the service provided by the City would be to inspect the on-site signs and assistance in compliance with the code as needed for a business. For this reason, having one fee applied to each business as would be done if the BTRC process is used, regardless of how many signs the business uses, is likely to be problematic in the context of Proposition 26.

A fee that accounts for the number of signs that a business uses is more likely to survive legal challenge. For example, a business that employs one on-site sign should not pay the same fee as a business with five signs because the cost to the City would likely be higher for the site with the higher number of signs. To determine what businesses utilize signs and the number of such signs and thereby decide the amount of the fee, inspection of the businesses premises is required. This cannot be accomplished using the BTRC process.

Collecting the Fee in Advance

The CSA suggested that businesses be billed ahead of time, for example one year, in order not to burden the General Fund. In this manner, the money collected would be put in a special fund and the money would build up until there is enough money to pay for the initial cost of this program. This presents a catch-22 situation in that the fee cannot be assessed until ownership of the business and the number of signs for such business is established and that can only be done after inspection. In other words, inspectors have to be hired, trained and put to work before any fees are assessed. Consequently, collecting fees in advance to build up a fund may not be feasible.

Even if fees could be collected from businesses ahead of time, such as by voluntarily reporting as mentioned before, some businesses would not receive the service (inspection of their signs) until years later after payment. For example, if this program runs on a 5-year cycle, some businesses may not be inspected until six years after they paid the fee. Since many businesses will add and remove signs, move or close their

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doors during the six-year span, one can expect that some businesses would request a refund of the fees, or transferring of the fees to another site and new businesses would have to be billed again. Additionally, it is possible that the City may have to pay interest for the period between payment of the fee and delivery of the service.

Amnesty

CSA was initially in support of an amnesty program in order to achieve voluntary compliance; however, providing amnesty for permit fees or any other fees is not feasible. Plan check and permit fee are User Fees that pay for the service of plan checking and inspection and cannot be waived or reduced because the Department will incur the cost of providing those services without reimbursement. Waiving this fee would be a drain on LADBS' Enterprise Fund and LADBS strongly believes that these fees cannot be waived.

Amnesty of other fees, such as the Code Violation Investigation Fee (LAMC 98.0421 ), Investigation Fee (LAMC 91 .0107.5.1) and Non-compliance Fee (LAMC 98.0411) are fees that go towards paying for the cost of the City to obtain compliance when Orders to Comply are written by an inspector would be a drain on the General Fund.

Currently, anyone seeking to voluntarily legalize a sign or any other un-permitted work, can do so without being subject to these additional fees when no Order to Comply has been written. This is a form of "amnesty" currently available and LADBS recommends that no other fee amnesty be considered.

Education Program

CSA suggested that training be made available to owners and contractors on the various sign regulations. Inasmuch as there are many Specific Plans and other Overlay Districts that contain sign regulations that are mostly enforced by City Planning , a training program would require a joint effort between City Planning and LADBS. Such training would also be funded by SCAP fees and therefore can be considered only if SCAP is approved and fees are collected.

Frequency of Periodic Inspections

Due to the size of the City and extraordinarily high number of existing signs, annual SCAP inspections would be very demanding on resources and not practical, so a multi ­year cycle would have to be established.

A substantial amount of time would be needed, not only to conduct the inspections, but also to obtain compliance. Additional in depth analysis would have to be performed

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during the Pilot Program in order to estab lish the frequency of inspections which of course, is directly dependent on staff resources and the level of increased enforcement.

Need for a Pilot Program and Fee Analysis by a Third-Party Consultant

Extensive prel iminary work would be involved in establish ing the amount of the cost recovery fee. A one-year Pi lot Program paid for by the General Fund would al low us to gather actual data to accurately estimate the time that it would take to conduct the program including inspections, enforcement and compl iance. Such pilot program wou ld extend from the beg inning to the end of the process using option A or option B (exp lained above) as directed by the City Council including site inspection, research of code and records, conflict resolution , appeals process, enforcement efforts includ ing litigation, and verifying compliance. The Pi lot Program, paid for from the General Fund, would not be able to estimate the effort and time necessary to collect the cost-recovery fee , however.

Inasmuch as LADBS has no avai lable funds or staff, it is the option of the City Counci l to fund add itional positions that would conduct the Pilot Program. A meaningful Pilot Prog ram would require at least four Building Inspectors, one Senior Inspector and one Clerk Typist. These Inspectors, Sr. Inspector and Clerk Typist would conduct enforcement inspections and otherwise perform all the funct ions that wou ld be performed under SCAP except collecting a SCAP fee .

The total cost to the City of a Sr. Inspector is approximately $166,413 per year, a Building Inspector is approximately $148,569 per year and the cost of a Clerk Typist is approximately $80 ,248. The total cost of one Sr. Inspector and Four Inspectors would be approximately $840,937 per year. The cost to the City can be partially offset by any non-compliance fees that would be collected as allowed by LAMC 98.0411 when there is no compliance with an order to comply within 15 days of the due date. The amount of the non-compliance fee is $550 per order to comply but there is no way to accurately pred ict how many times the fee can be assessed due to noncompliance.

Once the Pi lot Program is concluded, the Department will be in a position to recommend whether a third-party consultant should be hired to perform a fee analysis or not depending on the complexity of the issues. A fee analysis re lying on a Pilot Program to gather actual data to justify the cost-recovery fee is the only re liable way to ensure that any SCAP fee compl ies with the requ irements of Proposition 26.

Conclusion

The On-Site Sign Enforcement Program is potentially a very large and complex program that would require a large number of additional staff and resources. There are

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significant start-up costs (representative pilot program to determine staff levels, time and effort needed to conduct the program; possibly a third party consultant to perform a fee analysis; hiring and training staff; building a computer tracking system; purchasing necessary equipment for inspectors, acquiring office space, etc.) for this program that would have to be funded initially by the General Fund. Collecting fees in anticipation of the program on a voluntary basis to build up a fund to pay for those costs is an option that can be logistically complex and may yield unpredictable results.

A Pilot Program funded by the General Fund for one year would be the best option to allow the City to do additional sign code enforcement gradually and collect data and serve as a stepping stone to the full SCAP program. Once the pilot program is concluded, LADBS will be able to make recommendations for a permanent city-wide program including whether a third party consultant should be hired to do a cost-recovery fee analysis. The annual cost of salaries for the pilot program will be approximately $840,937.

After the Pilot Program, additional staff would need to be hired and trained in order to implement the full SCAP, if approved by Council. Equipment for the staff (computers, phones, desks, codes, etc.) would need to be purchased and additional office space would have to be avai lable before the full SCAP is started. Even though SCAP would be a fee-supported program, the City Council would have to initially approve the funds in the LADBS General Fund Budget to hire and train the staff, purchase equipment, provide office space and other costs to start the program. These are costs that need to be incurred before any fees are collected that may be partially offset if voluntary reporting and payment are used.

Robert "Bud" Ovrom General Manager