Gov't

Central’s Permit Process- Understanding the Money

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By Dave Freneaux

In 2008 the City of Central signed a three year privatization agreement with CH2M HILL to manage, on a contract basis, the provision of “City Services” and the operation of Central’s Permit Office.  This decision has been lauded as visionary and has been looked to by many outside of Central as a model for the future.  Whether CH2M HILL is awarded the contract in 2011 is not a topic for this article.  It is, however, important to understand the role of ANY company who would operate this agreement, now, or in the future.

Our agreement for permitting is a 10%-10%-80% formula.   For every $100 dollars paid by an individual or business in Central for a permit, 10% is remitted to the City of Central as income, 10% is retained by by the private company operating the permit office, and 80% is paid to Safebuilt, a national company who actually does all of the physical work of the permit process, including plan review and site visits to ensure compliance.  As an example, this fiscal year's budget calls for $335,000 to be received for business and residential permits in Central, the distribution of the funds would be as follows.

$33,500 to the City of Central, which is received as revenue for the City.

$33,500 to CH2M HILL, out of which they must provide a permit clerk’s salary along with insurance and benefits, an office open to the public to house the permit process, including computer, telephone, internet access, etc, and general liability insurance.

$286,000 to Safebuilt, out of which they employ an Inspection Official and a Building Inspector with all related insurance and benefits, two vehicles with insurance, fuel and repairs, liability insurance, and office overhead such as computers and communication.

Whether any or all of these funds are well spent is open for debate, but it is important when discussing permit fees that we understand who all of the parties are and how much of the total revenue is realized by each party.

 

14 Comments

  1. Bebe

    June 2, 2010 at 5:00 pm

    Safebuilt is subcontracted out by CH2,

    “SAFEbuilt is a frequent CH2M HILL OMI subcontractor providing building plan review, building inspection and permit services”

    http://www.omi.ch2mhill.com/news/newssplash/2008/Jun/0608.html

    which means CH2 as the contractor, subcontracts to Safebuilt whereby they recieve a portion of those profits you have implied that is being acquired only by Safebuilt. How much? What percentage? We may never know.

    The general rule of thumb is that the contractor pays the subcontractor 20-30% of the total from what I can research here in this short time. If I can find the time, I’ll dig a little more.

    Given this additional information, I find your article a bit misleading.

  2. dave

    June 2, 2010 at 5:31 pm

    I will look further into this and give you a more specific answer. I believe 80% ends up as revenue to Safebuilt and that CH2M HILL cannot exercise any discretion in that, but I will confirm that. I NEVER want to be misleading.

    Dave

  3. Bebe

    June 3, 2010 at 9:17 am

    Yes, I would appreciate that. I know facts can be a slippery slope at times due to non-disclosure clauses, joint ventures, special interests and varied perceptions. Sometimes the truth and facts are not readily seen, presented or even available to the public.

    I have no problem with Ch2 making money, that is how well run businesses stay in business. But the picture you painted here looks like poor Ch2 is operating at a loss and doing us a favor…lol. Successful businesses do not stay in business operating from such a perspective.

    Ch2 makes their money through contracts, such as the one with the City of Central, and the one with Safebuilt.

    Your statement in the article,

    “This decision has been lauded as visionary and has been looked to by many outside of Central as a model for the future.”

    This a highly debatable statement as well. This sounds like propaganda to me, another skill of businesses such as Ch2m Hill.

    I have nothing personally against Ch2m Hill. My point of contigence with Ch2 and the relationship it has with the City of Central I addressed in a post on another site. Rather than re-invent the wheel or re-write it, I will post it here for your consideration as well.

    The conversation on this other thread was dealing with the privatization issue, and whether this is a good thing for the city or not. I believe this needs to be seriously debated and looked at with open eyes, with as many facts as we can possibly obtain.

    At the very least, it may prompt interesting discussion. And hopefully we can get the big picture here and make the best decision for this city and its future. We all live here after all.

    I’ll post the conversation thread in the next comment section.

    Thank you for looking into this Dave. I know that your priority is presenting just the facts, and I know that can sometimes be quite a challenge.

  4. Bebe

    June 3, 2010 at 9:23 am

    This is the argument I have with privatization that was posted on another thread. One of Centrals citizens in this conversation is in full support of privatization and the reason he gives is to not have to deal with government employees and beauracy. This is my response to him. Please leave comments, so we can figure out what is the best course of action for the growth of Central…..

    While privatizing may prove beneficial in some areas, it is itself not a perfect system, nor is it immune from corruption.

    Privatizing some areas within a governmental system may make sense, for example, garbage pick up, but I think that there should be a balance of what would be harmless to the public to privatize. Some areas of the governmental system, for example permits, perhaps is not in the best interest of the whole to privatize.

    There can come with privatization problems with accountability as the public does not have any control or oversight of private companies; this is an issue currently being brought to court I
    believe here in this town over what is percieved to be public records?

    Privatization does not result in true competition either because it tends to produce natural monopolies. This is what I believe, we are possibly currently witnessing with the permit issue as well. They can pretty much charge what they like, because it is profits they percieve as their bottom line, and there is no competition here for them here in this area to worry about. For such areas as these, I think it would be in the best interest of the people, to not privatize this type of particular service.

    There are anti-trust laws to guard against the formation of such tendencies as natural monopolies from private industry that the public can fall back on however when faced with unreasonable and outrageous fees. But if the goal was to decrease beauracy by utilizing a privatization approach, you are just creating another potential issue here as well in lieu of beauracy.

    Also, there is the issue of profit, and since that profit goes to outside interests due to privatization, you are left with no substanial revenue for the city, therefore you’re only real
    option is to charge more and more taxes. I do not find this in the best interest of the city either.

    If you had a balance of privatization and city governmental agencies you could profit off of some of these areas, thereby, decreasing the need to increase taxes while improving the community at large from the profit obtained through these agencies at no additional cost to the taxpayer.

    What do you think of this argument?

  5. mike mannino

    June 3, 2010 at 11:40 am

    Bebe,
    I am in total agreement with you. I am the person you refer to that promotes contract services but by no means do I support across the board. I also am a believer in strong ethics laws and accountablity through stewardship to make sure we get what we pay for. To prevent monopolies, you have to make sure the contracts are not over 5 years in length and that they are open for bids at each renewal period. As far as the current contract, we have the ability to force the issue on anything that comes up because there is a termination clause for non- compliance. It just takes officials that are willing to invoke. I will guarantee if this was done, Ch2 would be more than willing to comply.
    This permit contract is a bad deal across the board and mistakes were made whenit was negotiated. I am going to be fair and say that we had a lot on our plate during that time and it was a way to get a quick start. But there is nothing wrong with admitting that it can be improved and fixing it. Instead, people steadfastly defend the system that is obviously flawed despite clear evidence. To be accused of creating trouble for bringing up problems is not the way to get people to work together. I would like to see the mayor and council address issues as they are brought up and if the data says nothing needs to be done, so be it. When it says we have a problem, like the permit system, it needs to be addressed.

  6. Bebe

    June 3, 2010 at 3:07 pm

    Hello Mike,

    CH2 may be onto your idea that it needs to and wants to extend the length of their contracts.

    This was a comment they made in their Form 10-k dated Feb 2010 for the US Securities and Exchange commission.

    “Included in the current trend is movement towards larger program and contract awards and longer-term contract periods for a full suite of services, (e.g., 5 to 20 year full-service contracts).”

    C:UsersBelindaDesktopCH2M HILL COMPANIES LTD – FORM 10-K – February 25, 2010.mht

    So, when renewal comes up, don’t be suprised if a longer contract will be requested. I am hoping though that Central choses not to renew the contract, and will instead work towards their own growth, profit and independence.

    And I also agree with you in that if the issue is pressed with these extremely unreasonable permit fees, they will negotiate, rather than risk losing the contract prematurely.

    Hopefully, we will learn from this experience, and move on with more independence and responsibility for this cities affairs in its crucial formative years.

  7. Mike Mannino

    June 3, 2010 at 8:49 pm

    Certain operations of government can best be handled by contracting, such as garbage collection, cleaning of ditches, and other high varible expense overhead operations. Others we should handle such as permits. Even if its a break even proposition, at least we have control. You cant convince me that our permit system is cost effective as it only involves fixed labor costs. We should be able to handle administrative jobs and control these costs as a city function.

  8. mike mannino

    June 4, 2010 at 7:34 am

    Something hit me last night that maybe someone on here can answer. We have already established that CH2 gets 10%,we get 10% and Safebuilt gets 80% of permit fees. Who pays for the administration of the system? By that I mean the people in the permit office here.

  9. cmay09

    June 4, 2010 at 5:43 pm

    Mike,
    Maybe the permit office is funded directly by our taxes. It has to get it’s operating budget from somewhere, and maybe the prices of some permits reflect upon making the existence of the office justified. Money generated from general permits not related to CH2, are simply rolled back into the system as ‘revenue’. This system is ripe for corruption don’t you think? I am not saying that this is how it works, but is very similar to the way things work at LSU! If we could follow our money, we would probably find a bit of corruption here also.

  10. Mike Mannino

    June 4, 2010 at 10:56 pm

    Got my information today.

    First, let me give some background on how this should be based on sound business practices.

    – When you have a company that is supplying 2 different services, one for a flat fee and one for time and materials, or in this case, fees collected, there should be a clean line between the 2. In the plant, we make them wear different uniforms so we know the people being paid time and materials are not working on fixed fee jobs, essentially double dipping.

    – CH2 has people in Central that are supplied as part of the fixed fee agreement that are also working on the permit side. Now the problem here is that if they have time to work both, then they have put too many people in the fixed fee overhead and we are paying more than we should.

    I’m going to be lenient here and defend the current contract assuming that we didnt have the time to really research becasue we needed to roll quickly. What I will not defend is the lack of action now that we have started to see where we messed up. There is nothing wrong with saying we made a mistake and we are going to fix it. However, its quite another to defend the indefensible and continue on as if nothing is wrong.

    I certainly hope that the new council is taking notes and will act quickly on this contract.

  11. Just_Brenda

    June 5, 2010 at 4:33 pm

    ok- I am just not understanding!!! Or maybe I do understand. This is what I understand to be true- not based on facts. Again based on the fighting going on facebook central exchange, which seems to have alot of CCN workers screaming. However, Mike M, Tim and Belinda make a strong case to listen to. Please understand I am new along with the other 10,000 new residents that Woody Jenkins – Called us into this wondeful “Mayberry Lifestyle” in the 2009 Welcome to Central- If you don’t have a copy of it, maybe I can get in back from my lawyer, so people can make copies of it themselves.. I don’t mean that as a threat.. By I am sick, that I trusted man – who was in Washington for 28 years, had a law degree, had a history of newsreporting (WAFB) and also news conservative columnist for the LSU paper- The Daily Reveille. All these position is in my eye a honor!!! Before I start, I want to give credit where credit is due… And that is to our founding fathers– Mayor Watts, and I do believe the member of current member of counsel. If I understand right. There job was put in their lap. They were just like us, just people trying to make a better place for our kids. The Mayor worked for FREE— for 16-18 months. I understand that EBR- didn’t give a rats butt about Central, wouldn’t clean our ditches, pick up our trash, basically help our town and we where paying them almost twice the amount for these services that we are paying CH2MILL. So here comes Woody Jenkins riding on is BIG WHITE HORSE– This is his home, he can lead the way, if Central would just let him. The good people of our founding father TRUSTES in his leadership ( Just as I had, along with the other 10,000 new resident ) Somehow, somebody knew about the company called CH2MILL?????Hmmm (WHO?) Long story short, they break away from EBR- got this comany that can MANAGE all services EBR was providing at HALF the cost to taxpaper, employ 90% Central residents, and get a little kickback money??? Geese- what a wonderful idea, all on broad say Yay- 6 Yay,,, Jenkins leading the way… Now, I understand and would have done the same thing if I was in Mayor shoes or ANY counsel shoe- no fault on their own. Now founding fathers- election comes, you had plenty of people that wanted to relieve you of you calling and YOU chose to STAY!!! Now with that job comes accountabitily, people have questions- it is now your job to step up!!! No more, heck- I don’t know! You ran a campaign to stay involved, other people was their that truely wanted to shape Central. I have ALOT of respect that yall admit that ya our just normal people like us, and Woody Jenkins came here with a plan. I wish our Presdient could make a honest statement like that. And when you claim, what is wrong with the contract we have in place now- I even agree!!! Unless we have a better deal somewhere, this is the Ace in the whole we need to get out of contract with CH2MILL- however if we don’t have another plan/bid- Hmmm, why are we sueing??? Kind of like Obama- why sue BP when right now, we don’t have a plan??? Then it hit me- Woody Jenkins is sueing??? I want the court to ask, If woody Jenkins KNOWS who put that ad in the paper??? I am think way outside the box- always question everything.. I LOVE OUR STATE– I want to LOVE MY CITY in that same passion!!! I am past Central Elections? I asked the question directed to the Mayor before the Election,(In Centralspeaks- I think) Can you explain what exactly is by your quote ” You are proud of the private/public relation with CH2MILL? Means- what is exactally a private/public relation??? And NOBODY ANSWERED NOR wanted to know- So yall voted, now HELP!!! Hold everybody accountable to their promise, move forward based on their answers and vision. If they are like Woody and keep changing for Republican to democratic for votes- ok just remember that next election. But no need to kick them NOW- Make them stand by their vision they POSTED in the paper. Their vision can change next election, cause we voted on your vision this election. As for Mike and Belinda, both who I respect on the facebook clan voices. But mostly Mike M. because he is in Management in a oil company- respect their alone is due. Mike from the little I know about oil, just because I really didn’t want that in my career. But basic Management skill 101 in oil. My little mayberry town in Alabama, about 2% of the residents here work for a company called “Agron” (mispelled) who then work for Shell oil company. Now WHY would a little town of Alabama even think of TRYING to get A HUGE company named Shell Oil out of the picture because then our little 2% city could save money and hey, build a park??? As a boss of Agron, I would laugh at little town of Alabama, and think they was CRAZY that I would even entertain the thought of making SHELL made at me for Alabama penny. And if the little town of alabama PUSHED it so far, as to smear our COMPANY’s name/rep… We would pull our of the little town, throw in the towel, and save are good name… Goodbye little town… Hello problems, we just got our rights to be our city, we don’t have a courthouse, we dont have a jail, we dont have a garabe truck, we don’t have the money, we know have 90% unemployment in our town, Our vision is fading, people are leaving, teachers are going to better schools, We are now BAKER!!! I know lets call Our old friend knight in shining white horse Woody Jenkins, he will know what to do – To save us!!! Phone ring, what do you mean he is on the canpaign trail for the 2012 presidental elction??? I love Louisiana to much, more then trying to help this town that doesn’t love me…. Me and Jindal have alot to do, but good luck to ya’ll, I had to move.

  12. William

    June 6, 2010 at 5:37 am

    Thank you, Brenda, for one of the most incoherent postings I have ever TRIED to read! Also, the roots to this political problem started well before we became our own city. You are not from Central, as you have possibly stated in your confusing little rant above, so please don’t assume you know what’s going on with some of our “elected” officials. You can have your opinions and your thoughts but just keep in mind that the people like myself,who have lived here our whole lives, know much more about what’s really going on than you do.

  13. Just_Brenda

    June 6, 2010 at 12:27 pm

    Willaam, I am glad you like it- It was intended as a story. And you make my point. Yall are friends with Mr. Woody (NOT ME– Ya’ll went to school together, your families are friends … If this was my design and I had/was – Using Woody Jenkins quote to “Long’s” louisiana position ” The most powerful man in the state NOT helping my state… I would think twice before I even entertain the thought of, throwing away his family business??? Dishonoring his name!!! And you make the statement, that these problem started long before we were a city!!! I thought I made that clear, that some people spend ALOT of education and work – YEAR designing their master dessign before, it is actaully tried. I wish I had a design 10 years before, and I tried it out in smaller town, such as Baker, (LEARNED opps maybe we should have had the school problem fixed first, tried in again in Zachary and Bam–it worked!!!! Now lets take what we learned to my hometown, and have them reap the benefits of my lifeworks, cause we are friends/family.. I am just saying IF that was the case, and I had HELP my hometown become a nobody to a somebody. Then, they boycotted, and slamed, me- the guy that made your 70,000 dollar home now, a 200,000 home.. and 4 years later, I am getting basically slam by the very people I helped, they were taking my paper away, they can do better without me!!! I would not let them steal my years design and connection to keep their city. No what would I do,,, I would take my connection elsewhere … Then laugh when the teacher leave to the neighborhood school, and our people are now unempolyed, try selling your house now, cause you don’t have a garabge truck, with your garage lining up in the driveway with fly and magets- its stinks, yall are now, a nobody, and again- yall turned against me- your childhood friend, your grandfather friend- yall got too big headed, thought yall could do it without me… Will yall can if you know how, and you got this plan years in the making. My interest is in Mayberry Alabama, we are doing something close to what Lousisana is doing. It just disgust me that the hatebook facebook clan, are attacking each other, people yall are friends. Maybe yall don’t understand that building a city, state does not happen over night, people have spend years in the making getting ready for this… I was actaully making a case for Woody. I wouldn’t make our MOST POWERFUL MAN IN LOUISIANA too MAD!!! If yall are dropping your support for his paper, you might want to pick it back up. Don’t get confussed, Me and Mr. Jenkins have issues because I feel I was lied too (which cost my family alot of money)…. along with the other 10,000 NEW people here– Not the friends/family of Woody Jenkins… I told Him and the Mayor, my paper will only run thur election, I will pull it off press after the election. I had NO INTENTION of the backlash, this man received nor did Dave!! Your facebook/hatebook took this way to far!!! and yall deal with your action… Now that I tried to make his business go back to the respect IT DEMANDS!!!! I will also go out on a limb, and try to save Central who is about to fall. Get Woody under oath, ask him– If he knows who put the ad in the paper, to brake that contract???- If he does, then yall might be able to hold him somewhat accountable to the success of his hometown.. If he honesly does not, And again, Nobody has a backup plan nor contract with a company to pick up where we kicked out EBR service, I will be leaving along with CH2MIL. As far as being incoherent, will- just believe me I try my best to write according to my ability, I don’t have a proofreader anymore, since I got out of the newspaper business-lol. Again, your claim because I haven’t lived in sleeping Central my whole life,- basically so Please censor any opinion you may have, and leave in to the people that are – in the loop…. CLASSIC!!! PRICELESS!!! I try to give ya’ll as much life expreience that I can. Heed as much warning, give yall ideas… I have helped small towns that have gone broke because of the free trade agreement years ago, I got involved, got these kids educationed thur collage. Worked with Washington… Again we are doing the same thing in Alabama.. So believe me I don’t want ANY part of the POLITICAL part in Central- You have a good man, Named Woody, taking care of that… Oh and Baker does too, however I am interested in these little town of Alabama where you have kids that dont have a future. I am sorry KIP HOLDEN IS A GOOD MAYOR!!! and I think Woody can handle Zachary too… If we can just keep Bobby from running for president and saying in louisiana- that would be great for louisiana, however if we love America as much as we love Louisiana, nobody can fault the man if he does take heed and run for the 2012 election. I was louisiana born, therefore, I feel I have done my part and EARNED my RIGHT to speak in ANY PUBLIC format about our leaders, however, if you are a hater and feel you have ownership of my voice because I aint in your high school yearbook???? Will you are true blue die hard, Central Blood… Nice to meet you Mr/Ms Williams

  14. dave

    August 7, 2010 at 9:51 am

    I owe all of you an apology for not getting back on this thread and telling what I believe to be the truth regarding to 80-10-10 arrangement with regard to permit fees. For the record, that Central receives 10% of the fees is a fact, that the other 90% is split 80-10 between the subcontractor and CH2M HILL is not a matter of record. Everyone I spoke to who was involved in the process offered and allowed that they believe that was the basis on which the contract was negotiated. However, CH2M HILL’s contrat with Central does not require that 80% of permit fees be given to the subcontractor. There may be a contract between CH2 and the subcontractor calling for that arrangement or indeed even for a different arrangement.

    In my original post I stated “$286,000 to Safebuilt, out of which they employ an Inspection Official and a Building Inspector with all related insurance and benefits, two vehicles with insurance, fuel and repairs, liability insurance, and office overhead such as computers and communication.” While it is clear that the great majority of the $286,000 would have to be paid to Safebuilt if they are operating at a profit, it could be a lower number. It is reasonable to believe the 80-10-10 assertion is correct, but it is entirely between CH2 and Safebuilt to determine their arrangement.

    Again, my apology for failing to bring these details back to the website. – Dave

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