1:30 P.M. - a) Consideration of Presentation of Community Development Department Historical Revenue and Expense Analysis; and b) Request for Board Direction Regarding Department Operations and Loan Repayment Plan

The Community Development Department (CDD) presented a comprehensive historical revenue and expense analysis, highlighting significant financial challenges and proposing strategies for fiscal sustainability. The department's overall annual cost is $5.14 million, with staff salaries and benefits (S&B) making up 71-75% of total costs. Lake County currently subsidizes 39% of CDD's costs, comparable to other counties.

Key Financial Challenges & Deficits:

• Building Division: Faces a mid-year budget deficit, with cash flow issues (cumulative total was -$131,532.42 by February 2026 without a loan). Permit issuance has declined from 2,258 (2016) to 1,409 (2025). Repaying a $130,000 loan by November 2026 would require reducing expenses by $130,000 or 1-2 staff positions. Full repayment by November 2026 would require $390,000 in reductions (3-4 staff positions).
• Planning Division: Faces a substantial $509,834 deficit in its mid-year budget for FY 25/26, partly due to the removal of a $397,000 planned building contribution and $105,000 in salary increases. The division performs 3,964 hours/annual of unfunded activities, including counter hours and Planning Commission support. Covering this deficit without closing the division requires significant staff reductions and fee increases.

Proposed Solutions & Next Steps:

• Fee Adjustments: Current fees do not cover full costs. Proposed average hourly rates would increase significantly: Building from $99.87 to $159.58, Code Enforcement from $65.00 to $136.70, and Planning from $128.75 to $245.48. These new rates incorporate a 21% indirect rate for administrative functions and divisional overheads (Building: 72%, Code: 59%, Planning: 55%).
• Operational Changes:
  • Building: Conservative revenue estimates, re-establishing $100,000 in reserves by FY 26/27, charging penalties for unpermitted construction, and adding fire inspection fees.
  • Code Enforcement: Saw a 95% increase in Notices of Violation and a 655% increase in administrative citations issued from 2024 to 2025. Citations owed surged by 1297% to $538,908. Strategies include increasing enforcement actions, developing lien tracking, and converting unpaid citations to liens.
  • Planning: Implement increased fees, reduce unfunded services (e.g., limit counter time to 30 minutes, charge for research and county projects), and enhance cost recovery tracking.
• Economic Outlook: California's economy is projected to grow slower in 2025, with recovery expected in late 2026 and stronger growth in 2027, which could impact future permit revenues.

The Board is requested to provide direction on department operations and the Building Division's loan repayment plan, considering these financial realities and proposed adjustments.