Analysis of the 2004-05 Budget Bill Legislative Analyst's Office February 2004

San Francisco Bay Conservation and Development Commission (3820)

The San Francisco Bay Conservation and Development Commission (BCDC) implements and updates the San Francisco Bay Plan and the Suisun Marsh Protection Plan. Under these plans, BCDC regulates and issues permits for (1) all filling and dredging activities in the San Francisco, San Pablo, and Suisun Bays including specified sloughs, creeks, and tributaries; (2) changes in the use of salt ponds and other "managed wetlands" adjacent to the bay; and (3) significant changes in land use within the 100-foot strip inland from the bay. The commission's main objectives are to minimize fill in San Francisco Bay and maximize public access to the shoreline.

The budget requests a total of $3.9 million for support of BCDC in 2004-05. This is a decrease of $958,000, or about 20 percent, below current-year estimated expenditures. The decrease mainly reflects a reduction in projected reimbursements from other state agencies for work performed on their behalf or as a pass-through of federal grant funds.

Recommend Revised Fee Structure, Creating General Fund Savings

We recommend the enactment of legislation to direct the San Francisco Bay Conservation and Development Commission (BCDC) to modify its permit fee schedule so that its permitting and enforcement costs are fully recovered from fees and other non-General Fund sources (penalties and reimbursements). This would result in savings of close to $2 million to the General Fund. We further recommend the enactment of legislation to establish a special fund for the deposit of all of BCDC's fee revenues. (Reduce Item 3820-001-0001 by $2,089,000 and increase new special fund item by a like amount.)

Fees Support Very Little of BCDC's Permitting and Enforcement Activities. The core program activities of BCDC include issuing and enforcing permits for specified development within its area of geographic jurisdiction. As shown in Figure 1, the budget proposes to fund these activities from various sources, but mainly from the General Fund. Permit fees (which are currently deposited in the General Fund) are proposed to support only about 5 percent of BCDC's permitting and enforcement activities.

BCDC's Permit Fees—Set Administratively—Have Not Been Revised in 13 Years. Under current law, BCDC is provided broad authority to assess reasonable permit fees. Our review finds that BCDC has not revised its permit fee schedule since 1991. In addition, we find that BCDC's current permit fees are set at levels far below the permit fees assessed by many local agencies for comparable development projects. For example, while BCDC assesses a $10,000 permit fee for a large project, many counties and cities in the Bay Area assess permit fees up to a few million dollars for comparable projects.

Fees Should Fully Cover Permitting and Enforcement Costs. We think that fees levied on permittees/developers should, along with penalties and reimbursements, fully cover BCDC's costs to issue and enforce permits. This is because there is a direct link between these activities carried out by BCDC and those who directly benefit from them through their development actions. Doing so would be consistent with the Legislature's actions in requiring the costs of most other environmental regulatory programs, such as those protecting air and water quality, to be largely if not totally reimbursed through industry fees and assessments.

Recommend Legislation to Direct Revision of Fee Schedule and to Create New Special Fund. We therefore recommend the enactment of legislation to direct BCDC to modify its fee schedule in order that permit fees, combined with any other reimbursement or fee/penalty-based funding, fully cover BCDC's permitting and enforcement costs.

The implementation of this recommendation would result in General Fund savings of $1,954,000 in the budget year, as this is the amount of General Fund (net of the $135,000 of fee revenues that are currently deposited in the General Fund) that would be replaced by additional fee revenues. To put this close to $2 million shift in funding to fees in context, we note that in 2003, BCDC processed 149 regulatory actions (major permits, permit amendments, minor actions) that authorized construction totaling $471 million (an average value of slightly more than $3 million per development).

We also recommend that the legislation create a special fund into which the fee revenues would be deposited, with expenditures from the fund subject to appropriation by the Legislature. We think that by depositing the fees into a special fund, rather than into the General Fund as is done currently, the Legislature's oversight of, and accountability for, the use of the fees would be increased. We therefore recommend that BCDC's General Fund appropriation be reduced by $2,089,000 (the $1,954,000 funding shift to fees combined with the $135,000 of fee revenues that are currently deposited in the General Fund) and that a new special fund item be increased by $2,089,000.