Facilities Permit Program

Facilities Permit Program raises controversy

2009-12-16T06:09:39Z

Questions and concerns — as well as support — have been raised over a city of Sacramento planning and building department program suspended after it was illegally used to fast-track the Nestlé water-bottling plant.

The little-known Facilities Permit Program came to light in late October when Nestlé's renovation of a South Sacramento warehouse was temporarily halted and a city investigation revealed work had started without legally required building permits.

Many people, including those criticizing some aspects of the current building approval process, said city staff have worked hard in the last few years to become more developer-friendly by improving the building approval process and resolving issues with developers earlier in their projects, which is especially needed for urban infill projects.

The FPP is intended to speed up approval for tenant improvements or renovation of existing buildings by businesses already established with the city.

Developers view the program as an "entrepreneurial" effort between development professionals and city Community Development Department staff to accelerate the building approval process, said Michael Heller, who transformed a former state agency building into the MARRS Building on 20th Street.

"It's overall a very worthy, innovative program. If there are some modifications to make it better, we would all support that," Heller said. "But we certainly would not like to see it disbanded."

While builders praised the FPP for streamlining and hastening the building approval process, others expressed confusion over the program, how it works and who benefits.

Chief among those expressing concerns was former Mayor Heather Fargo, who said she knew nothing about the program, which was adopted while she was mayor, until the city suspended it Oct. 27. During her administration, she was not aware of city staff giving the kind of verbal approval that was used to expedite the water-bottling plant without a formal building permit, which is illegal.

"Not with my knowledge and not with my support. I find it outrageous," said Fargo, who said she would have required the FPP be put on the city council agenda and discussed publicly if she'd known anything about it.

"It's a very public process — development is. It should be," she said.

Several people, including architects and developers who have worked on infill projects, said they didn't know or understand the FPP.

"I don't think anybody is familiar enough with that program — including the city itself," said one person.

Under the FPP and a similar program known as the Matrix, one team or building inspector is put in charge of a project from the beginning of a builder's effort to win a building permit. The Community Development Department's building division reviews construction plans, provides feedback and approves building permits.

"This program is designed to expedite the plan review and permitting process to facilitate a timely process," according to the department. "The most significant differences between the FPP and the normal building permit process is the ability to begin a project at the time of plan submittal and perform inspections with concurrent plan review, by using a team doing both the plan review and the inspections."

Those eligible to participate in the FPP have included building owners or management companies, tenants and contractors, according to the department. Participants must register each year. The size and cost of a project or building has no impact on participation, according to the department.

While mayor, Fargo had supported creating "permit-free" zones in areas that desperately needed to be redeveloped, but not without public knowledge, she said. She also worked to get the "pain" taken out of the building approval process for small business owners after her own experience in the 1990s. She and her husband, a general contractor at that time, had to go through more than 100 people who gave conflicting directions to get a permit to build a small shop and driveway on commercial property in North Sacramento.

Some business owners have given up on business projects in the middle of building approval processes that were going nowhere, she said.

Others who have opened businesses in rehabbed buildings within the last two to three years said their businesses were in danger of failing because of the costly delays and other problems involved in getting permits from the city. Some would not talk on the record for fear of retribution by city staff, they said.

"You put some people through hell and other people don't even have to get a permit? It's ridiculous," Fargo said. "It sounds out of control to me."

Some criticized the city for not issuing permits in a "rational" way.

"We have been concerned with what we've seen for years as a real disparity — a grossly unlevel playing field in terms of how the city handles different kinds of applications. People who are well-connected and have lots of money behind them get lots of favors, and have for years, even before the FPP," said one source. "On the other side, folks who aren't well-connected, who don't have a lot of money behind them... cannot get the city to issue them a permit for the simplest things.

"The FPP seems like a way of formalizing this verbal-agreement approach that has been going on for awhile," according to the source."You don't want it to be a free-for-all where the guys who have the juice get whatever they want and the other people get screwed."

Working through the FPP, the Swiss company Nestlé and its local contractors began construction work on an existing warehouse at 8670 Younger Creek Drive with only verbal approval from a building inspector who coordinates the program. The contractor, Panattoni Construction, is a participant in the FPP, rather than Nestlé, said David Kwong, acting head of the Community Development Department.

"Plans were submitted and verbal approval was granted on this project because of the plan's limited scope (i.e., work only included demising walls and pluming in an existing building)," according to information provided by the department.

Building permit applicants must pay fees to support the FPP and inspectors' time. Nestlé has paid $175,494 in fees for all three phases of the warehouse renovation, according to the Community Development Department.

Nestlé's water-bottling operations are expected to begin in January. The company had protested the stop-work order by saying the city's established process had been followed. The stop-work order was lifted in three business days.

Before the program was suspended, all FPP participants were given start-work authorizations or verbal approval as soon as plans were submitted to the city, as long as the work would not impact buildings' structural integrity, according to the department. The work was later inspected for compliance with city and state building codes.

While state law may not prohibit verbal approvals from replacing building permits, California Building Standards Commission Executive Director Dave Walls said he's not aware of any cities that allow building inspectors to issue permits verbally or in the field.

"I don't know of any local administrative procedures that would permit such a thing," he said. "Most will say you don't start work until you get a permit."

Various state agencies have oversight and can cite for violations of state code regarding the building of homes, schools and hospitals. The state legislature hasn't given any agency, including the Building Standards Commission, the power to enforce codes for commercial construction, Walls said.

Under state law known as the California Building Standards Code, the use of a phase permit program to fast-track a project is done so at the applicant's risk. Permits may be issued for phases of a project before another phase is designed or approved. But the applicant — not the approval-granting agency — takes all the risk for any work done before full approval is given for the entire project, Walls said.

Developers and other business people — including those who recruited Ray Kerridge as an assistant city manager — have met in recent weeks to strategize how to support the FPP and Kerridge, who brought the program from Portland and is now the city manager.

Developers once ranked the city of Sacramento as the worst place to do business in this region. Projects were stymied by the involvement of numerous departments with different agendas, which made developers feel like "a mouse on a treadmill," said Sotiris Kolokotronis, who developed the L Street Lofts.

"By 2005, it (Sacramento) was one of the best places to do business," Kolokotronis said. "I saw in the city some really good things happen."

Developers who seek a speedier process to renovate buildings or make tenant improvements under the FPP know they still must build to code and be in line with the building permit, and that they are assuming all financial risk, Heller said.

"I think that's fair," Heller said. "If a developer is going to benefit from an expedited process, they have to be willing to take that risk."

Suzanne Hurt is a staff reporter for The Sacramento Press.

McCarty: Questions must be answered

2009-11-13T05:15:33Z

Sacramento officials need to know a lot more about the Community Development Department's construction approval process and a suspended commercial building program before any action should be considered, Sacramento City Councilmember Kevin McCarty said Thursday.

Renne Sloan Holtzman Sakai, a law firm hired by the city to investigate the Community Development Department, must investigate how construction on a Nestlé water-bottling plant began in McCarty's district without building permits, how home-building permits were issued for a Natomas flood zone, when these practices began and how pervasive they are, he said.

Two weeks ago, the department's Facilities Permit Program was suspended after questions about the approval process for the plant revealed that Nestlé and contractors began construction work with verbal approval only. McCarty called the problems with the FPP and the practice of allowing construction without building permits the "second strike" against the department.

"We're investigating the department for wrongdoing in the Natomas Permit Program. We've asked that they look at this FPP process as well to see what was going on there as far as any wrongdoing," McCarty said. "By looking at Nestlé, we were able to bring to light some illegal activity that's been done maybe for a very long time."

The FPP is intended to speed approval for tenant improvements or renovation of commercial and industrial buildings involving businesses that do a lot of business in Sacramento and have established relationships with the city. The program may have "improved the city's relationships with developers," McCarty said, "but at what cost? At what expense to taxpayers? To residents?"

David Kwong, acting head of the Community Development Department, said last week that staff will ask the council to amend city code to allow FPP construction projects to start before building permits are issued — as long as a business has a written start-work authorization from the building division. The longtime practice, which predates the program, helped bring about the suspension of the FPP two weeks ago.

Any proposal involving the FPP is premature before the conclusion of the investigation, McCarty said.

"We owe it to our residents to make sure that our development department follows the law," he said. "We need to evaluate what's been going on with this FPP process and how long it's been going on. Then, and only then, should we talk about Mr. Kwong's proposal going forward."

Department staff want to "pull the program back, take a temporary pause" and bring to the City Council a "retooled FPP," department spokesperson Maurice Chaney said Thursday.

Retooling would happen "in concert with council just to make sure that the program is vetted thoroughly through the City Council and that they understand what the program is about," he said. "So, not only getting the appropriate info out to them, but just making sure that we’re transparent and open during that whole thing.”

The main question is whether the program is legal, said McCarty, who is proposing to change city code to require Planning Commission and City Council oversight of proposals for new water-bottling plants or any industrial facilities that use water for resale purposes.

Other cities allow construction with a start-work authorization only and the practice was incorporated into the FPP when that program was brought here from Portland several years ago, Kwong said. Sacramento City Manager Ray Kerridge developed the FPP for Portland 10 years ago when he managed that city's commercial inspections. Phoenix was the only other city in the country known to have a similar program at that time.

Meanwhile, Councilwoman Sandy Sheedy said the FPP's role has expanded over time. When the program started, it provided businesses a way to make tenant improvements quickly, she said. Now, it’s not being used in the way it was designed, she added.

“It morphed into something else that was completely different,” Sheedy said.

The city doesn’t want to be “unfriendly” to businesses, she said, but needs to be “cognizant” of how it works with them. Sheedy noted that she hopes the program can be made workable.

McCarty said he would like water-bottling facilities to require conditional use permits. Environmental reviews and public hearings are required for proposed development projects only if there's a request for a land-use change or a conditional use permit, he said. Neither were required for the renovation of the warehouse Nestlé is leasing.

The council was supposed to consider McCarty's proposal as an urgency ordinance on Oct. 27. But City Attorney Eileen Teichert said Nestlé hadn't done anything illegal. However, she determined that the department's practice of allowing construction to start without a building permit violates city and state codes.

"We screwed up so bad handing out building permits through this crazy FPP program, no court of law would find they (Nestle) did anything illegal," McCarty said.

Plenty of million-dollar projects never go before the council if there are no requests for zoning changes or conditional uses. Developer John Saca's failed 53-story Towers at Capitol Mall project never went before the council, he said.

McCarty and other councilmembers have said they knew nothing about the plant until a grassroots organization, Save Our Water Sacramento, contacted them in September. Councilmembers Rob Fong, Steve Cohn and Lauren Hammond said Wednesday they did not know about the program until after a stop-work order was posted on the door of the Nestlé plant Oct. 23.

On Thursday, Sheedy said she was unaware of the program until it was debated during the Nestlé controversy. Councilwoman Bonnie Pannell also said she had been in the dark.

“I knew nothing about the Facilities Permit Program before the Nestlé company’s move to Sacramento,” she said in an e-mail Thursday. “I’m looking forward to learning about how the program works. I will keep an open mind.”

There's much more the council needs to learn about the program, McCarty said, adding, "I'm proud that by bringing this Nestlé issue forward, we uncovered this very inappropriate activity in the city of Sacramento."

Staff reporter Kathleen Haley contributed to this report. Photo by Anthony Bento. Suzanne Hurt is a staff reporter for The Sacramento Press.

City staff seek building code changes

2009-11-10T05:27:54Z

The Sacramento City Council soon may be asked to amend city code to legalize a longtime practice that helped bring about the suspension of the Facilities Permit Program.

In the next few weeks, city staff want to ask the council to allow FPP construction projects to start before building permits are issued — as long as a business has a written start-work authorization from the building division, said David Kwong, the city's Planning Division director.

Staff is working with the city attorney's office to learn if the practice and the building code amendment would be legal, Kwong said.

"What I'd like to do is vet that form with the city attorney's office, make some tweaks and take that to the council," said Kwong, who is also serving as head of the Community Development Department, which oversees the planning and building permits divisions.

The department's director, Bill Thomas, and department supervisor Dan Waters, son of Councilman Robbie Waters, are on paid leave while the Federal Emergency Management Agency, the city and an outside law firm hired by the city look into the department and home building permits approved for the Natomas flood zone despite a ban.

The FPP is intended to speed approval for tenant improvements or renovation of commercial and industrial buildings involving businesses that already have established relationships with the city, Kwong said. If the change were approved, the FPP could resume within about two months, he added.

The city suspended the FPP on Oct. 27 after questions about the program arose in relation to the Nestlé Waters North America water-bottling plant. A stop-work order had been posted on the plant's door Oct. 23 while Councilman Kevin McCarty and other city officials inquired into plant construction.

That's when city officials learned that Nestlé and contractors had begun the first phase of construction work without a formal building permit or start-work authorization. A building inspector who coordinates the FPP had given verbal approval only.

A Nestlé official said at the time that the company had complied with the city's building laws.

The city attorney's office, led by Eileen Teichert, determined the practice was not legal, and that allowing construction to start without a building permit violates city and state codes, Kwong said.

Teichert was out of town and not available to comment.

The use of start-work authorizations rather than building permits for some commercial construction predates the FPP in Sacramento.

"We found there was a common practice dating back to 1992 or 1995," Kwong said. "It seemed like an acceptable practice for 14 years, and they went forward with that."

The practice is used in other cities and was incorporated into the FPP when that program was brought to Sacramento from Portland about four years ago, said Kwong. "It's not something we invented," he said.

As planning division director for four and a half years, Kwong was not involved in building services until three weeks ago.

Sacramento City Manager Ray Kerridge, hired in 2004 as an assistant city manager in charge of development, brought Thomas with him from Portland after developers criticized Sacramento's development application and building permit processes as laborious and confusing.

The two have developed programs to speed the application process and encourage development in Sacramento.

Kerridge began his career in Portland as a building inspector in 1979. After becoming manager of commercial inspections, he developed Portland's Facilities Permit Program and the Commercial Combination Inspection Program.

Portland's FPP was designed to match one building inspection team with a building or group of buildings. That team would do all plan review, permitting and inspections of interior tenant improvements to speed improvements or renovations. Phoenix was the only other city in the country known to have a similar program when Portland's began in 1998.

In Sacramento, an inspection team may be replaced by one building inspector certified in several areas, Kwong said.

According to the city of Sacramento's website, "The FPP facilitates a rapid approval process for tenant alterations and improvements of commercial and industrial facilities, (including) minor tenant improvements, including maintenance, repair and minor alterations; and major interior tenant improvements and remodels. This includes tenant improvements to new and existing structures.

"The FPP is available to owners of commercial and industrial buildings, building management companies, and/or their tenants. The program best serves customers who have on-going interior tenant improvements and where facility maintenance, upgrade and renovation is frequent. A good example is a large shopping center with multiple tenants."

As a newcomer to Sacramento, Nestlé would not fit the program. However, Buzz Oates Real Estate Co., which is leasing the warehouse to Nestlé, or Panattoni Construction, which is overseeing the work, would fit the program as established customers, Kwong said.

Nestlé is the building permit applicant. Panattoni received a start-work authorization for the plant renovation's second phase on Oct. 7.

This is the first time the City Council has been asked to weigh in on the FPP.

State building codes must be reviewed to see if FPP practices would be in violation, or to align new city code with the state. City staff also will look for precedents in other cities and counties that use the start-work authorization form, Kwong said.

Suzanne Hurt is a staff reporter for The Sacramento Press.