ADMINISTRATIVE REPORT

TO: Standing Committee on City Services and Budgets

FROM: Director of Development Services in consultation with the Director of Support Services, Chief Building Official, Director of Current Planning, Director of Finance, and Director of Legal Services

SUBJECT: Year 2003 Zoning, Building and Trade Permit Fees

RECOMMENDATION

GENERAL MANAGER'S COMMENTS

COUNCIL POLICY

It is Council policy that fees and charges be established on the basis of the cost of providing the associated services or at market level where the service is provided in a market environment.

PURPOSE

The purpose of this report is to seek Council approval for an inflation adjustment of 2.75% in zoning, subdivision, sign, tree removal, building and trade permit fees based on a "flat fee", and miscellaneous fees, to reflect increased costs due to inflation in the year 2003.

BACKGROUND

The most recent application fee increases in the specified services were approved by Council in November 2001, effective January 1, 2002. At that time, Council addressed fee increases for 2002 as well as proposed "catch-up" increases for 2000-2001. Total increases of 3.5 % for 2000-2001 and 2.5 % for 2002 were proposed. Council approved 3.5 % and 1.5 %.

The primary reason for inflationary increases is to keep fees consistent with City administration and enforcement costs which increase primarily to contractual salary-related costs. Fees are adjusted for inflation in years where we do not conduct a comprehensive review of cost and market rates for equivalent service(s)

DISCUSSION

The budget target for application fees was established for 2003 to reflect both anticipated application volumes and an anticipated fee adjustment to cover inflation. Due to higher than anticipated application volumes, application fee revenues in 2002 were, collectively but not in all cases, above budget target.

Application volumes vary year to year with some years producing revenues in excess of the budget projection and in other years there are revenue shortfalls. Whether application volumes - and thus revenues - fluctuate from year to year and budget targets are met or not, the City continues to face inflationary increases in the costs of its services. Consequently,fee adjustments for inflation are best undertaken on a regular, annual basis as they are incurred, since they are difficult to introduce later on a "catch up" basis.

Although inflationary increases for 2003 are recommended, it is also recommended that there be no increase to the fees that are currently set for demolition of buildings containing dwelling units that have at any time since November 1, 1986 provided residential occupancy. That demolition permit fee is currently set at $1,000 per unit.

In July 1999, Council approved a building permit fee exemption for building envelope repairs, in line with the recommendations of the Barrett Commission report of June 1998. This exemption was re-evaluated in October 2001 and extended by Council to December 2002. While the frequency of applications for envelope repairs on low- and medium-rise wood frame residential buildings has remained quite constant over recent years, there remains the potential for an increasing number of repairs to the exterior cladding systems of high-rise residential buildings, as noted in the October 2001 report. In view of this, it is recommended that the exemption of building permit fees for residential building envelope repairs remain in effect indefinitely, until repairs have been effected to all buildings constructed in the 1980 to 1998 period which exhibit premature building envelope failures.

The next comprehensive review on planning, building and trade fees is under way and will be reported to Council in late summer, recommending specific fee changes for 2004. This review will compare all specific fee categories relative to typical associated costs in providing the services, and recommend adjustments amongst the various fees charged.

The 2.75% fee increase for 2003 recommended in this report would encompass application fees pertaining to the following:

· Zoning and Development Fee By-law #5585;
· Subdivision By-law #5208;

· Building By-law #8057 in terms of plumbing trade permit fees and other "flat fee" charges (i.e., not building permit application fees based on a percentage of the value of construction*);

· Electrical By-law #5563 in terms of "flat fee" charges (i.e., not electrical trade permit fees based on a percentage of the value of construction*);

· Suites Inspection By-law #6553;
 
· Gas By-law #3507;

· Sign By-law #6510;

· Private Property Tree By-law #7347; and

· Miscellaneous Fees (Planning) By-law #5664.

Approval of an inflationary increase for 2003, approved at this time and effective March 1st, would provide little advance notice to prospective applicants of forthcoming increases, inhibiting them from factoring these into project costs in advance. In order to provide forewarning, written notice was sent to industry groups on January 20, 2003, advising of the increases to be recommended by staff, providing five full weeks of notice prior to the anticipated fee increases. A further notice will be sent advising of Council's decision on February 13th.

FINANCIAL IMPLICATIONS

The annual salary increase paid to staff in 2002 was 3%. Estimated annual inflation in Vancouver for 2002 was 1.75%. Approximately 80% of City costs associated with development activity are salary related, the remaining 20% is for non-salary items. The proposed increase of 2.75% is derived by taking 80% of our increased salary costs (2.4%), plus 20% for inflation of our non-salary costs (.35%).

Based on current application volumes, the 2.75% inflationary increase would result in revenue increases of approximately $32,000 per month assuming current application volumes. City costs in providing our application services essentially consist of staff costs. For various reasons, staff complements tend not to be altered on an annual basis corresponding to changing application volumes; rather, increased volumes yield reduced service response time in application processing. Staff costs do, however, increase by way of contractual obligations. Increasing our application fees to reflect the increased costs to the City in providing these services will help ensure that our revenues continue to cover our costs even in those years when application volumes decline.

During 2002, the City waived fees on 79 building envelope repair permits totaling $171,500 in revenue waived. Comparable figures for 2001 are 74 building envelope repair permits totaling $137,000 in revenue waived, and 105 permits in 2000 amounting to $170,500 in revenue waived. If Council extends the fee exemption, it is reasonable to expect revenues waived in 2003 would be similar.

CONCLUSION

Planning, building and trade permit fees are commonly adjusted annually to ensure full recovery of City administration and enforcement costs. This report recommends an increase of 2.75% for inflationary increases in 2003, to be effective at the beginning of March 2003. It also recommends indefinite continuation of the building permit application fee exemption for building envelope repairs.

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Link to Schedules.

cs20030213.htm

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