Loophole threatens coffers

Two programs that give financial incentives to Costa Mesa residents who remodel their houses have been widely used, but city officials say that if program loopholes aren’t closed before renewal, the city could lose hundreds of thousands of dollars.

The Build Green Incentive Program and the Residential Remodeling Incentive Program allowed residents to improve their houses without paying city fees for permits and inspections before they expired at the end of June. The programs were aimed at getting people to make their houses more energy efficient and beautify their neighborhoods.

The problem is many people exploited the programs to make minor, necessary repairs, or completely rebuild their houses — things that they would have had to do anyway — without paying the city, said the programs’ administrator, Khan Nguyen.

According to a staff report, the city stands to spend about $300,000 paying for the labor to inspect and approve plans for remodels that should be shouldered by the applicants.

“Originally we left the [Residential Remodeling Incentive Program] wide open to any residents or remodels, but the intent was to make improvements to curb appeal,” Nguyen said.

Some people went to great lengths to avoid paying permit fees that can be up to $3,000 or $4,000. About half a dozen homeowners demolished their houses all the way down to the foundation, leaving only one wall intact, so that they could qualify for fee waivers, Nguyen said.

City Council members will vote on whether to renew the programs Tuesday, and the council will also be faced with deciding whether to close the loopholes staff uncovered.

“I think it is time to rethink the program, especially in light of the budgetary constraints we have now,” Councilwoman Katrina Foley said. “If we can see wholesale rebuilding due to energy-efficient incentives, I fully support that approach.”

If the council agrees with staff’s recommendations, added restrictions would be put on applicants for fee waivers. Either their projects would have to cost less than $50,000 or add less than 500 square feet to the house, or they would have to improve energy efficiency or limit waste and qualify as “green” projects.

In other words, people could still replace doors, windows and water heaters under the program as long as they replace them with more energy-efficient versions.

Year to date, $36 million in home improvements have been made under the programs’ umbrellas.

Nguyen recently was named Official of the Year by the International Code Council for his work in administrating both programs.

ALAN BLANK may be reached at (714) 966-4623 or at [email protected].