BUILDERS' FEE COSTS SKEWED CHICK SAYS GAMES PLAYED ON PRICES.

Byline: RICK ORLOV Staff Writer

The Los Angeles Building and Safety Department used financial ``tricks and games'' to boost its budget and may have systematically overcharged developers for permits and other services, City Controller Laura Chick said Thursday in a second stinging audit of the agency.

In a sharply worded rebuke of how the agency manages its $68 million budget, Chick said the way fees are calculated is among the questionable financial practices. She also criticized the agency for continuing to impose a fee to pay for an automated system that was completed nearly a decade ago.

``I'm not saying anything criminal was done here, but we have procedures in place that must be followed,'' Chick said at a City Hall news conference.

``What concerns me is that we see a department, behind the scenes and out of the light of day, using tricks and games in how it oversees some of its funds.''

Chick questioned the 6 percent surcharge the department has been imposing on permit fees, generating $5 million a year. The surcharge was designed to pay for development of an automated plan-check and inspection-status system that was completed in 1997.

``This fee was designed to sunset once the computer program was completed,'' Chick said. ``The department tells us that they are using this money for other technological programs.

``I know we need those, but there is a right way to do things. They should have sought authorization to use the money for different purposes.''

Chick said she also found lax oversight of $12.7 million in cash bonds that developers provided to cover repair costs. Chick said the money should have been transferred to the city's general fund or possibly returned to developers.

And Chick said the lack of oversight has meant that, in some cases, the city has been overcharging on some fees meant to recover costs.

California law requires that building fees charged by local agencies may not exceed estimated reasonable costs of providing the service.

But Chick noted that the department's fee system, last updated in 1996, is not directly linked to the cost of providing services but is based on the valuation or construction cost of a project.

``As a result, the department may have over-recovered its costs by as much as 16 percent over the last several years,'' the audit report says.

``Despite the fact that its fees have remained the same for the past decade, the department has increased its revenue due to the increase in valuation of construction projects fueled by the current real estate boom.

``The higher the construction costs, the higher the permit fee, no matter the cost of providing permit services.''

Chick also said the agency failed to transfer about $1.2 million to city general-fund reserves, as required by the City Charter, and could not show that it planned to use the funds for other valid obligations.

Mayor Antonio Villaraigosa asked for an immediate review by City Administrative Officer Bill Fujioka.

``The audit identifies several fiscal and management issues within the department that demand immediate attention,'' Villaraigosa wrote.

Building and Safety Department officials said they were preparing a response to the audit.

Department spokesman Dave Keim said the agency is committed to working with Chick to implement changes.

Chick insisted she was not being critical of the department's general manager, Andrew Adelman.

``Ultimately, the buck does stop with him, but I think these are problems we have had for some time,'' Chick said. ``What we are doing is providing him with a road map to make improvements.''

On Monday, Chick issued a scathing performance audit of the department, saying it had expedited permits and construction at the expense of inspections and code enforcement, creating potential danger for the public.

``The one thing this department has to do is assure the public that the buildings they occupy are safe,'' Chick said. ``One of the things they have to do is let their inspectors do their work and have supervisors in the field make sure inspections are being done.''

She also cited a backlog of hundreds of thousands of inspection reports and the department's failure to punish repeat violators.

``We had a problem years ago with the department not expediting permits fast enough, and it appears we have gone too far the other way,'' Chick said. ``Public safety has to be the department's primary focus.''

Department officials said they have not jeopardized public safety, but acknowledged there is a backlog of cases because of a shortage of inspectors.

Chick said her waste-fraud unit is now investigating some whistle-blower complaints about the department that she has received since her first audit was released Monday.

rick.orlov(at)dailynews.com

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