Vancouver City Council

ADMINISTRATIVE REPORT

Date: July 5, 2004 Author/Local: R. Scobie/

604.873.7399

RTS No. 04378
CC File No. 1758
Meeting Date: July 22, 2004

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 2004 Zoning, Building and Trade Permit Fees

RECOMMENDATION

A. THAT Council approve an across-the-board 2.5% increase (as reflected in the attached fee schedules) in all zoning, subdivision, sign, tree removal, "flat fee" building and trade permit fees, and miscellaneous fees, to compensate for inflationary increases in the City's costs, to be effective September 14, 2004.

B. THAT the Director of Development Services and the Chief Building Official advise the development and building community of these changes.

C. THAT various administrative fees for legality research requests, producing permit/document copies, and file research - environmental requests, be incorporated into the Miscellaneous Fees (Planning) By-law No. 5664 and the title amended to delete A(Planning)@, as outlined in the attached fee schedule.

D. THAT miscellaneous amendments to delete references to repealed zoning district schedules and correct references to specific officials, consistent with previous revisions to other by-laws, also be incorporated in the various fee schedules.

E. THAT the Director of Legal Services bring forward for enactment the necessary by-law amendments to By-laws No.=s 5585, 5208, 8057, 5563, 6553, 3507, 6510, 7347 and 5644, generally in accordance with the attached fee schedules.

GENERAL MANAGER'S COMMENTS

The General Manager of Community Services RECOMMENDS approval of the foregoing.

A general fee increase of 2.5% reflects increases in staff 2004 wages associated with provision of the various services discussed in this report, for which fees are charged. Staff costs (wages and benefits)constitute over 90 percent of the total City expenditures in delivery of these services. The 2.5% increase is also expected to be sufficient to recover other cost increases to be paid by the City in purchasing items such as materials/supplies required to provide the various services.

As discussed in this report, more significant increases in some of the fees will be the subject of a further report in October. This later report will address significant revenue shortfalls in recovering costs related to specific services, as identified through the recently completed comprehensive fee review.

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 2.5% 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 2004. Some long-established fees for various administrative services are also proposed to be incorporated into a by-law.

BACKGROUND

The most recent across-the-board application fee increases in the specified services were approved by Council in January 2003. At that time, Council approved a fee increase of 2.75%.

In July 2003, Council approved additional fee increases for: (i) development applications for major projects dealt with by the Development Permit Board (10% increase); (ii) some development applications dealt with by the Director of Planning on behalf of the Board (3% increase); and (iii) tree removal permit applications (5% increase).

In previous years, Council approved across-the-board fee increases of 1.5% for 2002 and 1.5% for 2000-2001.

The primary reason for inflationary increases is to keep fees consistent with City administration and enforcement costs which increase primarily in direct response to contractual salary-related costs. Fees have traditionally been adjusted annually for inflation, other than when selected fees have been more comprehensively reviewed as to costs and market rates for equivalent service(s).

DISCUSSION

The budget target for application fees generation was established for 2004 to reflect both anticipated application volumes and an anticipated fee adjustment to cover inflation. The inflationary figure used was 2.5%, in expectation of salary-related cost increase of this amount for this year, although contract negotiations had not concluded.

Due to higher than anticipated application volumes, application fee revenues in 2003 were, collectively but not in all cases, above budget target. The same was true in 2002.

Since application volumes vary year to year, some years produce revenues in excess of the budget projection and in other years the revenues are less than had been budgeted. 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.

This year, we have withheld advancing an inflationary fee increase as we have been concluding a comprehensive review of the various services to determine the extent to which our fees have generated sufficient revenues to offset the total corporate costs incurred in providing these services. Our completed review has indicated that for some of the services the current fees are significantly deficient in recovering City expenditures. The details of our analysis were recently shared with Council, including costs incurred in some services that arguably should not be recovered either due to explicit, Council-approved subsidies or other tangible public benefits that might be lost if applicants had to fully pay for the City incurred expenditures. Having identified those services where costs should be more fully recovered, staff are now assessing which specific fee categories within those service areas should be increased, and by how much, to generate the additional revenues for cost recovery. The results and specific fee category increases to be recommended will be reported to Council in October. Staff believe the Aacross-the-board@ increase of 2.5% need not be delayed for completion of this further analysis dealing with some very specific fee categories.

Although inflationary increases for 2004 are recommended, as in recent years it is again 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.

The 2.5% fee increase for 2004 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 since value of construction implicitly responds to inflationary increases and applicant's submitted values are reviewed against industry standards);
$ 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 2004, approved at this time and effective as soon as the by-laws could be presented for enactment (i.e., September 14^th) would provide little advance notice to prospective applicants of forthcoming increases, inhibiting them from factoring these into project costs in advance. Annual inflationary fee increases have, however, been well established and it is reasonable to expect an increase this year. Furthermore, this year=s proposed increase is actually being advanced later in the calendar year than previously. The proposed fee increases, while not to be ignored, should have little impact since project application fees typically represent about 0.7% to 3.0% of the total project construction value. A 2.5% increase on these relatively insignificant cost components would increase fees to become between 0.7175% and 3.075% of total project construction value (i.e., an increase of less than one-tenth of one percent).

Nonetheless, in order to provide some forewarning, the Urban Development Institute Liaison Committee members were briefed at their meeting on May 19^th. Written notice was subsequently sent to the UDI and other industry groups on June 25^th, advising of the increases to be recommended by staff. Following Council=s deliberations on this report a further notice will be sent advising of Council=s decision.

FINANCIAL IMPLICATIONS

Based on last year=s application volumes, the 2.5% inflationary increase would result in revenue increases of approximately $28,500 per month.

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. Consequently, increased application volumes do not yield increased staff costs; rather, increased volumes yield reduced service response time in application processing. Current market conditions have created development and construction activity levels resulting in a sustained and growing Apeak@ in our application volumes, with consequential declines in our service delivery.

Notwithstanding our reduced service response time in application processing, staff costs do increase by way of contractual obligations and cost recovery would justify increased application fees. 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.

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 2.5% for inflationary increases in 2004, to be effective as soon as the various by-law amendments can be enacted. It also recommends a few administrative service fees not previously established via by-law be incorporated into an existing by-law containing miscellaneous fees.

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