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POL Government Elected Officials Auditor Griffin-Valade Divisions Ombudsman Reports Formal Investigations
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Portland, OR 97204
phone: 503-823-0144
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Ombudsman's Investigation Report, Case # 01-43

MEMORANDUM

Date:  December 10, 2002
 
To: 
Mayor Vera Katz
Commisioner Jim Francesconi
Commissioner Randy Leonard
Commissioner Dan Saltzman
Commissioner Erik Sten
 
From:
Michael Mills, Ombudsman
Gary Blackmer, City Auditor
 
Ref: Final Investiagation Case # 01-43
 
Please find attached the Ombudsman’s Investigation Report, Case # 01-43.
 
The complaint is primarily about the level of enforcement fees assessed by the Bureau of Development Services (BDS), against a building that was being renovated. It involves Code Enforcement Fees of some $4,600 for installation of a shower without a permit.
 
The primary recommendation of the Office of the Ombudsman is for BDS to evaluate the cost of its services relative to the fees already paid on this case, along with a reasonable penalty for the work done without a permit, and make a refund to the owner of the excess amount. The Bureau responded to many details of the case during the drafting of this report, however, they declined to submit a response to our recommendations.
 
This office recognizes that there is a systemic problem associated with this case and numerous other enforcement cases. As BDS becomes increasingly reliant on enforcement fees to support its budget for enforcement staff, their ability to provide all property owners reasonable opportunities to correct violations and to apply more equitable penalties is greatly diminished.
 
cc: Margaret Mahoney, Director, Bureau of Development Services
 
Ombudsman Investigation
Case Number 01-43
December 11, 2002

Complaint
 
This case is a complaint from a woman about enforcement fees assessed by the Office of Planning and Development Review (OPDR), now known as the Bureau of Development Services (BDS), against a building she was renovating. She alleged (1) some staff members failed to respond to her request for assistance; (2) the penalty fees were unreasonable; and (3) the waiver requirements and procedures were not clearly stated.
 
The complainant violated City Code when she installed a shower in a commercial space without a permit and occupied the commercial part of a mixed-use building for residential purposes. These violations were brought to the attention of the Neighborhood Inspections Unit of the BDS and monthly code enforcement fees and other charges totaling approximately $4,600 were imposed by the City as a result of the housing violations.

Case History
 
On December 21, 1999 as a result of a routine inspection, a city Fire Inspector issued a Notice of Violation of City Ordinance that stated “Immediately Discontinue occupying building as a residence OR/legalize under benefit of permit through OPDR.” At the time, the complainant was a part owner of the building in question, an older two-story property, which had been approved for residential use on the second floor and commercial use on the ground floor. She had expanded her living space into part of her studio on the ground floor.
 
Eventually, after accruing substantial enforcement fee charges from the City, the complainant became the sole owner of the property and legalized the space with permits for use as a two-story townhouse approved for residential use. The complainant improved the building with the assistance of the Portland Development Commission and the support of her neighbors and tenants.
 
The complainant made a written request to the fire inspector for the Fire Bureau’s permission to remain at the premises while the process of obtaining permit approval was completed, which was granted. The illegal occupancy violation was referred by Fire to BDS. On December 23, 1999 the fire inspector issued a Fire Inspection Report listing three violations to be corrected: install electric cover plates, install a fire extinguisher, and repair the ceiling. The complainant installed electric cover plates, installed a fire extinguisher, and repaired the ceiling prior to January 25, 2000 as required. According to BDS, these violations and corrections are unrelated to the housing violations.
 
Occupying a commercial building for a residence is a violation of several codes, the Building code, the Housing Code and sometimes the Fire Code. At least three units of BDS could have asserted jurisdiction over the matter: the Neighborhood Inspections unit, the Code Compliance unit, and the Commercial Inspections unit.
 
A housing inspector from the Neighborhood Inspections unit left a card on January 13, 2000 requesting the owner to call her. The complainant called the inspector back that day and took responsibility for the building, stating that she was going to work with the City to get permits to legalize the town-house space. The inspector came the following day and inspected the inside of the building where she noted that a shower had been installed without a permit. The inspector sent a Notice of Violation of the property maintenance code on January 19, 2000.
 
These violations were:
 
1) A portion of the first floor commercial section of this building was being illegally occupied as residential space. A change of occupancy permit was required 29.50.010, 29.50.020;
 
2) A shower had been installed in the commercial section without obtaining the required permits, inspections and approval. 29.50.010, 29.50.020;
 
3) Electrical outlets and switches lacked covers and plates. 29.30.190.
 
The violation letter stated “Until the corrections are inspected and approved by the housing inspector, your case remains open, and you will be charged with monthly enforcement fees.”
 
City Code section 29.70.010 states that the City shall charge a penalty in the form of a monthly enforcement fee for properties in violation of Chapters 29.30 (Housing Maintenance Requirements) and 29.40 (Dangerous Buildings). However, the code section establishing the monthly fees does not mention the provisions of 29.50 regarding work done without permits and residential occupancy. When originally conceived the monthly fees were not designed as a tool for addressing work done without permits. Section 29.60.030C allows the Director to exercise discretion to take actions deemed appropriate to gain compliance. City Code sections 29.60.100 and 3.30.040 allow the Director to grant exceptions to the penalty and other provisions of Title 29.
 
On March 30, 2000, a second housing inspector left his card at the property. The complainant called him back on April 3, 2000 and reiterated that she was in the process of becoming the sole owner of the property, obtaining financing to buy out the building’s other owners and legalizing the living space. The housing unit did not contact her again until November 1, 2000 when the second inspector left a card again.
 
In the meantime, the complainant completed the process of buying the building. As part of the transaction she paid the City approximately $900 for the fees that had accrued on the property. It is not this initial amount that she complains was unreasonable.
 
The building is considered a commercial structure, which triggers different treatment from a one or two family dwelling. Oregon law states that only a licensed plumber can work in a commercial structure. If it were a single-family house, generally she would have been allowed to perform the plumbing work herself. Further, fees for commercial building violations are double the amounts for residential structures. Her fees started at $220 per month and then doubled to $440 per month after six months (not including additional billing charges and interest of about $40 per month). Low-income property owners and owners of single-family dwellings can apply for fee waivers but commercial properties do not qualify.
 
Now the sole owner of the building, on June 14, 2000 she contacted the Bureau in an attempt to clear up the housing violation case. She purchased a plumbing permit and called for an inspection. However, she found out that she was not eligible for the required commercial permit, since she was not a licensed contractor. The permit was cancelled and the money refunded.
 
According to the complainant’s recollection of events, the inspector she spoke to told her that she would probably have to open the tiled walls to expose the shower plumbing. The Bureau has stated that she was told “to hire a licensed contractor to take out the permit, do the work (emphasis added) and call for a final inspection.” She states she requested that an inspector come look at the shower first, but the inspector refused.
 
The Bureau states its policy is as follows:
 
“Property owners are not automatically told to tear out work done without permits. They have the option to hire a licensed contractor to obtain a permit and certify that the work was done to code. Another option is to have a contractor obtain a permit, open up a small sample of the work done and request an inspection. Depending on the work the inspector sees, he/she can either sign off on the permit or require that more of the construction be opened up. This is done in small portions so as to disturb the work done as little as possible, while confirming that it meets the code requirements.”
 
The Bureau further states that:
 
“inspectors are available for inspections or consultations for all permit holders free of charge. When there is no permit, a consult will be done for a fee. Should a request have been made and paid for, an inspector would have made a consultation inspection.”
 
The complainant states that she felt frustrated by what she understood the inspector to be saying and what she felt was a lack of willingness on the part of the housing and plumbing inspectors to help resolve the violation. She resented being treated as “violator” rather than someone who was working to improve an older building for the benefit of herself and her neighbors. She resisted what she heard to be the requirement that she open the wall prior to having the shower inspected, a prerequisite to closing the violation case. Additionally, shortly thereafter, at the beginning of July she had personal circumstances that delayed her progress in resolving this matter. These factors contributed to her delay in hiring a contractor to purchase a permit for the shower.
 
She did go forward with the lengthy process of legalizing her living space. Permits were issued on November 3, 2000, but not finaled until March 27, 2002. On November 15, 2000 the complainant hired a licensed plumber to purchase a commercial plumbing permit for the shower. When interviewed, the contractor remembered the incident and stated that he requested a consultation inspection, but was told by the inspector that he would not come to inspect unless the wall was opened up. The Bureau states that Plumbing Supervisor has talked with all involved inspectors, none of which recall saying this or receiving this request. The contractor canceled the inspection request since he knew the owner did not want to open the wall for the inspection.
 
On January 16, 2001 a housing inspector left a message suggesting that the complainant move out of the commercial part of the space until the occupancy change was complete and to call him for an inspection when she did so. This information confused the complainant because the issue of the shower was still outstanding, the fees would have continued, and responding to his suggestion would not resolve the case.
 
A few weeks later she encountered a senior inspector at a neighborhood meeting and complained about her situation. The inspector referred her to another inspector. It was through this special assistance that a commercial plumbing inspector agreed to make a “consultation” visit on February 16, 2001 to look at the shower. According to the Bureau, a free consultation inspection could have been requested through the automated inspection system anytime after November 15, 2000 when the contractor obtained the permit. This was not the complainant or contractor’s understanding at the time.
 
The plumbing permit was finaled on February 27, 2001 with the installation of an inexpensive backflow device. On March 6, 2001, less than 30 days after the plumbing inspector’s consultation visit, the housing violation case was closed. The Bureau states that she also moved into the residential portion of the building as suggested by the Housing inspector in order to correct the violation for illegal occupancy of a commercial space.
 
Once the housing violation case was closed, the complainant sought relief from the additional enforcement fees that had been assessed since her initial $900 payment. The new fees had accrued to almost $3,500. She made a written request for a fee waiver on May 28, 2001. She received a response dated July 5, 2001 denying her waiver request on two grounds 1) the income-based waiver is only available for single-family residences and 2) a waiver is not granted after fees have been assessed. In March 2002 she refinanced her mortgage and paid off the accumulated fees, interest, penalties and charges.

Investigation
 
In the course of this review we interviewed the complainant, staff of the Commissioner’s office, supervisors of the inspectors mentioned in this report, and others familiar with code enforcement mechanisms. We examined documents provided by the complainant, a file kept by the Commissioner’s office and written responses to the complaint prepared by the BDS Director’s Office. We also studied the City Code and the BDS website, documents concerning waivers, the final report of the Citizens Advisory Committee on Quality Rental Housing, and the Code Enforcement Task Force Report and Recommendations. We relied upon knowledge gained from other cases brought to our attention regarding similar violation cases in the Code Compliance unit. The Mayor’s Office and BDS reviewed preliminary drafts that were then redrafted in consideration of their comments.
 
Findings Allegation 1: staff members failed to respond to her request for assistance
 
This allegation has to do with whether or not a plumbing inspector should have come to the site to inspect the shower earlier and whether the inspectors provided useful information to help the complainant close the case as quickly as possible.
 
According to the complainant, just after paying $900 in enforcement fees, she was eager to resolve the housing violation case. She asked for an inspection of the shower by a plumbing inspector in June, but was told that she first needed a contractor to purchase a commercial permit. The complainant initially refused. She did not want to go to the additional expense of hiring a plumber to reinstall the shower when a plumbing inspector had not looked at the existing situation. While BDS states there is no evidence this was a requirement or her only option for legalizing the shower, that was what the complainant and her contractor believed. It is possible that both parties bear some responsibility for the faulty communication regarding what was required to resolve the violation.
 
In November, five months after her initial contact with the commercial plumbing supervisor, the owner did hire a contractor to purchase a permit but she did not authorize him to open the wall. In February, in response to a special request from a senior inspector, a consultation inspection by a commercial plumbing inspector did occur resulting in the closing of the housing violation case.
 
The owner bears responsibility for her choice to not comply with the original suggestion made in June that she hire a contractor to purchase a permit and do the work. However, upon inspection, the inspector was able to see enough of the work to insure that it met the minimum requirements of the code and to sign off on her permit after some minor corrections were made. This matter may have been resolved more quickly if a plumbing inspector had visited the site and provided a fee-based consultation and if it had been made clear that opening up the wall was not necessarily mandatory. The fact that the inspectors responsible for enforcing the housing violations were separate from those responsible for the plumbing permits and inspections made the process more difficult, as well as the owner not having a single point of contact with the City.
 
The inspector contacted at the neighborhood meeting, and the commercial plumbing inspector who made the consultation visit should be recognized for their proactive efforts to resolve this case.
 
Allegation 2: the fees were unreasonable.
 
The owner admits that she violated the permit and occupancy requirements. She also admits that she did not attempt to resolve the housing violation prior to the June 12 property transfer when she paid $900 in penalties to the City for these violations. An additional $3,000 in fees (plus $700 in interest fees and penalties) accrued during the period when she was engaged in obtaining permits, not just for the shower but for the renovation of the building and the change of occupancy permit. According to BDS, the enforcement fees could have been avoided altogether had the owner moved out of the commercial space and legalized the shower.
 
The issue of how the City should respond to work done without permits is difficult, especially where the work in question was done long ago. Owners will not necessarily mind the cost of purchasing permits and having inspections to evaluate the situation. But some, as in this case and other complaints we have received, will resist hiring a contractor to expose or redo the work. The Bureau, on the other hand, has a responsibility under state law to ensure that construction work is done with permits and inspections.
 
The question raised by the complainant is whether, notwithstanding her initial work without permits and refusal to remove the shower wall, the amount of the additional fees imposed by the City is reasonable.
 
These fees appear to have exceeded the City’s costs to monitor the violation and assist the owner. The amount is disproportionally high for a penalty for the wrongdoing of not obtaining a plumbing permit for the shower and extending her living space in her studio. There is no reason to believe that this owner was a repeat offender or that she benefited financially from the violations. There was not any apparent or potential harm to anyone other than herself during the period of time when the violation remained. The fees in this case did not seem to act as an incentive to encourage the owner to act, since even with the mounting fees she resisted opening the shower walls before a plumbing inspector came to see it first.
 
The enforcement fees for work done without permits are not a requirement mandated by City Code, but are rather an enforcement tool to be used in the Director’s discretion. There are other enforcement options such as a one-time penalty fee of $250 or charging double permit fees. It would be more equitable if the monthly revolving fees were only assessed after a consideration of factors to determine their reasonableness in a given situation and whether other enforcement alternatives would be effective and fair, rather than being imposed routinely, as appears to have been the case here.
 
The imposition of revolving fees by Neighborhood Inspections in this case is not necessarily consistent with the treatment that the owner might have received from inspectors in a different unit of the Bureau. From observations of other cases, it appears that when the Code Compliance unit handles cases of work done without permits, they might allow the owner more than the initial 30 days before instituting the revolving fees and might consider waiving part of the fees once the work has passed a final inspection. Building inspectors in the Combination or Commercial Inspections units have the authority to charge double permit fees as a penalty for work done without permits rather than initiating the revolving monthly fees.
 
Allegation 3: the waiver requirements and procedures were not clearly stated.
 
The denial of the request for a waiver conformed to internal Bureau policy but the second stated reason was not clearly documented at the time. The Bureau has since issued a revised written waiver policy and is in the process of making the waiver and appeal policy more clear to the public. There is a possibility that had this case been under the Code Compliance unit that some adjustment on the fees could have been possible after final inspection had occurred.
 
Recommendations Primary Recommendation:
 
We recommend that BDS evaluate the cost of its services relative to the fees already paid on this case, along with a reasonable penalty for the work done without a permit, and make a refund to the owner of the excess amount. In addition, to help prevent recurrences of similar cases we recommend that BDS:
· Review inconsistencies with the various enforcement approaches toward work done without permits and implement alternatives to automatic monthly revolving fees for these types of violations.
· Develop the practice of providing a consultation within 60 days of enforcement fees being imposed for code violations, clearly identifying one inspector to act as a point person for the owner to work with toward the goal of closing the violation case as quickly as possible.
 
Note: In Late July of 2002, the Office of the Ombudsman provided general recommendations to the Bureau of Development Services that addressed systemic problems within the Bureau operations. One of the recommendations that relates to this case was for the Bureau to develop a plan for phasing out the revolving monthly penalty fees and replacing them with alternatives that utilize fixed penalties.
 
This office recognizes that there is a systemic problem associated with this case and numerous other enforcement cases. As BDS becomes increasingly reliant on enforcement fees to support its budget for enforcement staff, their ability to provide all property owners reasonable opportunities to correct violations and to apply more equitable penalties is greatly diminished.

Response
 
While BDS identified numerous areas of concern within this draft report that have been reviewed and addressed over the last several months, the Bureau did not address the specific recommendations. In reply to our further request for a response to the recommendations, on November 6, 2002, the Bureau indicated that they were still working on a response to the recommendations. The Ombudsman’s Office was advised on December 8, that BDS would not be responding to the recommendations.
 
12/11/02