Cowlitz County is repaying $1.9 million to its building permit fee fund after discovering the money was incorrectly used for three years — forestalling a lawsuit like one filed in Clark County. Not everyone is happy with the plan though.

County officials already had developed a repayment plan that included previous repayments totaling $700,000 in 2008 and 2009 and another $1.2 million spread over four years. Given the county’s tight budget, though, the Lower Columbia Contractors Association wanted to formalize that plan.

The contractors group first questioned how the permit fee money was spent two year ago. Commissioners agreed to the request Tuesday and a formal resolution is expected in two weeks.

One member of the association, though, said area contractors and residents are owed a refund.

“I believe the money should be returned to the people it was taken from,” said Cary Butler who stressed he was speaking as a citizen and contractor and not for the association. “If I in my business violated state law, I would be prosecuted and have to pay penalties and fees and probably be in prison.”

The county already has placed $700,000 in a Building and Planning fund and will add $300,000 a year for the next four years. The money should reduce the need for fee increases in the short term and also will be there in tough economic years when permit fees do not cover all the costs of permit processing. The department also has been formally separated from the county’s main general fund to ensure permit fee dollars remain where they belong.

For years building and planning permits were part of the county’s overall general fund budget, as was the case in most other counties in the state. That is legal, but a state law also requires that permit fees only go toward processing those permits. The issue was clarified with a lawsuit in Bainbridge Island.

Between 2005 and 2007 the county had an unprecedented increase in building permits. Commissioners, wary of past downturns, held off on increasing staff, leading to delays in processing and complaints from contractors and the public. Not hiring more staff also meant there was “extra” money coming in from permit fees because the fees were still being collected but staff costs didn’t increase. The “extra” money was used elsewhere in the general fund, which is a violation of state law.

Commissioner George Raiter said officials never took that close a look at the permit fee finances because they assumed the fees were basically breaking even as they had in the past.

Also, he said in several years the general fund actually subsidized the building and planning department when permit fees did not cover all the processing costs. From 2008-2010, for example, Raiter said you could make an argument that the county isn’t charging enough because it still has permit staff in place but the number of permits has dropped with the faltering economy. Laying off more permit staff, though, would leave the county unprepared when the economy rebounded, he said.

After other counties were sued about the permit fees matter, the local builders association asked for a review in Cowlitz County.

“The reality is most counties were doing it wrong,” said Steve Madsen who worked on the class action lawsuit filed against Clark County by the Building Industry Association of Clark County. (Madsen now has his own private land use practice in Cowlitz County and is no longer affiliated with the BIA).

Clark County was sued for $4 million and settled last year for $1.2 million, which is being refunded to permit applicants who submit the proper documentation.

Local contractors decided against a lawsuit here, saying they wanted to avoid the legal costs and ensure as much money as possible was put back into the permitting system, acting vice president Jeff Richter said.

That said, officials said they would notify their members and area businesses of the discrepancy. “Any person that feels as though litigation is warranted may pursue this on their own accord,” an association press release states.

Butler, though, says the county overcharged contractors and residents because it took in more money then it spent on permits — sometimes 33 percent more or $320 on a $1,000 permit. And he wants the money returned even though the association — of which he is a board member — agrees with the county’s plan.

“We were overcharged, there’s no doubt about it,” Butler said.

Raiter disagreed with Butler’s take, saying no one was overcharged, the money just wasn’t used within the permit process.

“We didn’t increase the permit fees and take the difference,” he said. Rather, because the county didn’t hire more building and planning staff like it should have, the permit dollars were used elsewhere.

Madsen said there was never an argument that counties intended to overcharge, just that accounting practices weren’t stringent enough to abide by the permit fee law.

“It’s not an issue of intent, but there were just never procedures in place and it took a lawsuit to really get a judge to say 'Here’s what the law means,'” he said. But, he added, “the real issue, in my opinion, is in Cowlitz County there’s not an aggressive trade association that’s willing to take on the county.”

Commissioner Axel Swanson, though, said he was glad there was an “amicable” resolution to the matter.

“I think the board has worked with the contractors association very well,” he said.

“Spending taxpayer dollars on a court case just doesn’t make much sense,” added Raiter. “So this agreement and compromise was reached.”