SUPPORTS ITEM NO. 3
CS&B AGENDA
JANUARY 30, 1997
ADMINISTRATIVE REPORT
January 14, 1997
Our File: 1755-1
TO: Standing Committee on City Services and Budgets
FROM: Director of Permits & Licenses
and the Director of Finance
SUBJECT: 1997 Comprehensive Trade Permits Fee Review
RECOMMENDATIONS:
A. THAT Council approve a general 1.0% inflationary
increase, and, in addition, adjustments to recover the
full cost of City support functions, other specific
increases, and new fees related to the Building By-law
(B/L 6134), the Electrical By-law (B/L 5563), the
Plumbing By-law (B/L 5964) and the Gas Fitting By-law
(B/L 3507). Proposed fees are detailed in Appendices
A through D.
B. THAT the Director of Legal Services be instructed to
prepare the necessary By-law amendments.
C. THAT upon approval of this report, the Director of
Permits & Licenses notify the construction industry
and the general public of the new fees.
GENERAL MANAGERS COMMENTS
The General Managers of Corporate and Community Services
note that this report reflects a change to recover City
support costs other than those of front-line staff. In the
past, fees were set to recover the direct costs relating to
the inspection and permitting activities. This approach
generally did not recover the cost of support functions,
such as accommodation (i.e., maintenance services), central
computer systems, and staff and equipment costs in the other
departments which provide support facilities for the
front-line staff in Permits and Licences. In the past, these
support costs were funded by property taxes, which arguably
did not meet the Council objective of "full cost recovery"
for user fees. Further, the message which is being expressed
by
community leaders, through the Mayor's Forum process, is that the
City should ensure user fees are set at appropriate levels before
considering property taxes increases. While this change will
generate fee increases in the range of 4 - 10%, the General
Managers of Community and Corporate Services believe these
increases are consistent with Council's objectives of full cost
recovery, and preferable to continuing to fund these costs
through property taxes.
Given the magnitude of the increases, their impact on the
development and construction industries, and the potential
implications for the ultimate development consumer, Council
may be inclined to phase-in the increase over a number of
years. However, this will mostly just redistribute the
impact among development projects with no rhyme or reason.
Those which are lucky enough to incur certain fees in 1997
will pay less that those which come in 1998 and so on.
This only rewards or penalizes development phasing and
creates inequities. If Council is inclined to raise fees,
it is more equitable to do it in one bite.
The General Managers of Community and Corporate Services
RECOMMEND approval of A, B, and C.
COUNCIL POLICY
On January 17, 1991, Council resolved that every
department/board review services for which fees are now charged
to ensure full cost recovery, or that fees are equivalent to
competitive charges where the fee is of a market nature.
It is Council policy to set fees at a level sufficient to
recover the associated costs of issuance, enforcement and
administration of trade permits. Annual inflationary
adjustments are made to fees and once every three years a
comprehensive review is conducted to ensure that fees reflect
the City s changing costs. The last such review was completed in
1992.
PURPOSE
This report recommends inflationary and other cost recovery
adjustments to trade permit fees in the Building By-law,
Electrical By-law, Plumbing By-law and Gas Fitting By-law.
BACKGROUND
It has been Council policy to adjust trade permit fee levels on
an annual basis to ensure costs are fully recovered. Trade
permit fees were last adjusted for inflation in early 1995 (for
June 1, 1995 implementation), at which time a general increase
of 3.0% was approved along with other adjustments to specific
fees.
Every three years, a comprehensive review of fees is undertaken
to ensure that the annual adjustments appropriately reflect
changes in City costs over the three year interval. The last
comprehensive review was undertaken in developing 1993 fees.
On February 27, 1996, Council approved changes to the trade
permit fees to fully recover the costs of the secondary suite
program. In order to recover approximately $400,000 in costs
related to seven full-time positions all trade permit fees to be
increased by 4.0% in 1997.
On March 28, 1996, Council approved increases in all trade permit
fees in 1997 (2%) and 1998 (2%) as part of a financing plan for
the new document imaging/management system that is being
installed in Permits and Licences. These increases are intended
to generate $400,000 annually to provide partial repayment of a
loan from the Capital Financing Fund for purchase of the system.
On September 28, 1996, Council approved a 5.0% fee increase in
building permit fees for applications valued in excess of
$50,000. This increase is to offset the administrative costs
associated with the new regional development cost charge program
that begins on January 1, 1997.
DISCUSSION
This report provides Council with a series of proposed fee
adjustments that follow a review of expenditures and revenues for
trade permits. The report deals with the following areas:
Recommendations to bring current trade permit fees to cost
recovery levels, including a component for city support
services and overhead. This will generate an estimated $1.3
million in fee revenue.
Recommendations for an inflationary adjustment of 1.0% to
offset cost increases for 1997, generating an estimated
$350,000 in fee revenue.
Review of fee adjustments related to programs approved by
Council earlier in 1996, with an effective date of 1997.
These increases have already been approved by Council as
outlined in the background section of the report.
Council is aware that a major review of the development and trade
permit process is underway in Community Services which will
result in a report to Council in the first quarter of 1997. The
Development and Building Process Review (DBR) is expected to
define service and system improvements for the trade permit,
development permit and the rezoning process. Following from
approval of the recommendations coming from the DBR, staff will
undertake a review of the structure of the fee schedule and it is
likely that a new fee schedule will be brought to Council for
consideration associated with process changes.
Adjustments to Bring Current Fees to Cost Recovery Levels
Trade Permit fees are set to capture the direct costs of handling
trade permits as well as departmental and civic support services.
Processing trade permits is the responsibility of the permits and
inspections division in the Department of Permits and Licences
with the involvement of Engineering, Fire and other departments.
In addition to these direct costs, an allocation for support
services, based on staff size and space utilization, has been
made. In the past these costs were not fully recovered.
The recommendations recognize that there has been a growing
contribution made from support services in the administration of
trade permits. This includes, for example, a growing use of
information technology systems. Some of the other support
services include billing and collection, providing human
resources functions, maintenance and security for City Hall, and
legal services.
The overall cost of support services is approximately $25 million
and trade permits account for approximately 5.0% of the total
support service costs or $1,240,000. In addition, there are
support activities within the Community Services Group that
relate to the issuance and administration of trade permits and
these have been estimated to be $89,000.
Without the inclusion of city support services there is only a
$120,000 shortfall in cost recovery for trade permit fees based
on 1996 costs. However, with the inclusion of support services
the shortfall increases to $1,449,000.
A summary review of items relevant to cost recovery for trade
permits is shown in Table 1.
Table 1
Overview of Trade Permit Cost Recovery (1996)
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Increase in
Fees to Achieve
Revenues Costs Cost Recovery
Trade Permits $9,440,000 $9,560,000 1.25%
Community Services
Support Services - 89,000 1.00%
City Support Services - 1,240,000 13.95%
Total $9,440,000 $10,889,000 16.20%
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The distribution of costs to the appropriate trade permit fees
is done by examining the revenues and costs of issuing a
specific permit. The percentage fee increase to achieve cost
recovery will vary from permit to permit, and is detailed in
Table 2.
Inflationary Fee Increase for 1997
Recommendation A also deals with the requirement for an
inflationary fee increase for 1997. It is recommended that all
trade permit fees be subject to a general increase of 1.0%,
reflecting adjustments due to anticipated changes in the City
operating costs. These increases are in addition to those
discussed above. The overall proposed 1997 fees for trade
permits are set out in Appendices A through D.
Table 2 summarizes all of the fee increases by percentage, as
proposed in this report. The first three columns under the
heading Recommended Fee Increases identify percentage fee
increases which are necessary for trade permits to achieve cost
recovery levels in 1997. The percentage fee increases under the
heading Prior Approval are provided for Council s information
having been considered and approved to programs underway.
Table 2
Overview of Trade Permit Fee Increases
_________________________________________________________________
Recommended Fee Increases Prior Approval
Cost City Support General Secondary Document Regional
Adjustment Services Inflation Suites Imaging DCCs
Departmental for 97
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Building By-Law
ad valorem <$50,000 3% 10% - 4% 2% -
ad valorem >$50,000 3% 10% - 4% 2% 5%
unit fees & inspection 3% 6% 1% 4% 2% -
file search 35% 10% 1% 4% 2% -
Electrical By-Law
ad valorem - 4% - 4% 2% -
unit - 4% 1% 4% 2% -
inspection 3% 6% 1% 4% 2% -
Plumbing By-Law
ad valorem - - - 4% 2% -
unit - - 1% 4% 2% -
inspection 3% 6% 1% 4% 2% -
sprinkler 36% * - 1% 4% 2% -
Gas By-Law
ad valorem - 4% - 4% 2% -
unit - 4% 1% 4% 2% -
inspection 3% 6% 1% 4% 2% -
_________________________________________________________________
* Prior Council approval received.
Building By-Law Fees
The Building By-law contains three types of fees:
value-based or ad valorem (based on construction value),
flat, and
per-unit fees.
Value-based fees are used for building permits, providing for
fee calculations based on the estimated construction cost of a
project and are only changed when there are marked differences
between costs and revenues.
This interim fee review suggests that, in addition to the
general increase of 1% recommended above, an additional increase
of 3.0% be approved for departmental costs and an additional
increase for city support services of either: 6% (where the fee
is for hourly services or flat/unit fees) or 10% (where the fee
is ad valorem).
The proposed increase is in addition to other increases: 4.0%
for the secondary suite program, 2.0% for document imaging, and
5.0% for development cost charges administration that apply to
permits with a construction value exceeding $50,000.
The foregoing increases would mean that the base building permit
for work under $5,000 in value would increase from $65 to $77 and
the inspection rate would increase from $86 to $100 per hour.
These proposed increases, along with specific increases for
building By-Law file search fees described below, would bring the
building inspections branch into full cost recovery, assuming
normal levels of construction activity.
Building By-Law File Search Fees
File search fees are currently below cost recovery levels. A
file search involves a search of the City s property records and
is used by owners or prospective owners or their agents to
establish compliance with appropriate bylaws, including the
Zoning and Development Bylaw and the trades bylaws. The
expenditures associated with a search and preparation of a report are currently $130,000 and exceed the 1994 - 1996 average annual
fees of $88,000 - $92,000. It is recommended that fees be
adjusted by 52% overall to achieve cost recovery. Table 3
highlights the current and proposed charges for this service.
Table 3
Special Search of Building Records Fees
________________________________________________________
Current Proposed
One or Two Family Residence $79 $120
All Other Buildings $160 $243
________________________________________________________
The full impact of the building fee increases are reflected in
the building permit fees outlined in Appendix A.
Electrical By-Law Fees
The Electrical By-law contains value-based, flat and per-unit
fees. Value-based fees are used for electrical permits,
providing for fee calculations based on the estimated
construction cost of a project. These fees are not adjusted
annually, since it is expected that they will increase over time
with increases in construction costs.
Unit fees are used for specific units of work done, such as
hours of labour for special inspections, plan reviews or
after-hours work. The recommended increases include 1.0% for
general inflation, 4.0% for city support services, and 9% for
hourly inspection services.
The impact of this change to the By-law is reflected in
Appendix B.
Plumbing By-Law Fees
The Plumbing By-law fees are all based on units of work. The
recommended increases include 1.0% for general inflation and 9%
for hourly inspection services.
The plumbing permit fees for sprinklers (first head, one or two
family residence) are in the second year of a three year fee
increase to phase in cost recovery. In 1996 Council approved a
fee increase of $40 for 1996, 1997 and 1998 respectively. If the
inflationary and document imaging adjustments are also applied,
the total fee for 1997 will be $160.
New Fee Category - Fire Pump Testing for High Rise Buildings
The sprinklering of high rise buildings, greater than 18 metres
in height, imposes an additional cost on the City due to the need
for fire pumps. To ensure sufficient water pressure, all high
rise buildings need a separate fire pump so that the sprinklering
system can operate effectively. The installation requires the
City to undertake a review of the pump and its back up generator,
flow testing, pressure verification, and other inspection duties.
This typically requires 1.5 - 2.0 hours of staff time.
It is proposed that the City charge $150 for this service, which
represents 1.5 hours of staff time plus support costs. During
the next fee review it will be decided whether there needs to be
a further adjustment to the fee. The impact of this fee is
limited to only high rise buildings and does not apply to single
family residences.
The impact of these changes to fees in the By-law are detailed
in Appendix C.
Gas Fitting By-Law Fees
The Gas-Fitting By-law contains only unit-of-work based fees. The
recommended increases include 1.0% for general inflation, 4.0%
for city support services, and 9% for hourly inspection services.
The impact of this change to fees in the By-law is detailed in
Appendix D.
SUMMARY IMPACT ANALYSIS
Any trade permit fee increase will result in higher building
costs. In reviewing a number of recent single family
developments with a construction value between $250,000 and
$450,000 it was possible to broadly estimate the cost of
obtaining trade permits. For instance, the fees for all trade
permits tends to be in the $3,000 - $4,000 range, and this
includes a $500 fee for the demolition of an existing single
family home. This represents about 0.8% - 1.2% of total
construction value.
Trade permit fees can be substantially higher than stated above
if the applicant requests additional services, such as changing
the residential property address which will cost an additional
$383. Fees will be even higher if an applicant needs special
services such as work to be re-inspected or inspected during
overtime.
Based on a sample of residential and commercial buildings
constructed in 1996, it is anticipated that if the proposed trade
permit fee increases are approved the aggregate cost for trade
permits will increase by about 11% - 17% for each project. This
increase will mean that trade permit fees will equal about 1.0% -
1.5% of total construction value. Appendix E provides an example
of the current and proposed trade permits related to two randomly
chosen commercial and residential construction projects built
during 1996.
CONCLUSION
Based on Council policy of maintaining cost recovery for trade
permits, the Director of Finance and Director of Permits and
Licences have concluded that there are a number of areas where
fee increases are necessary to meet the City s policy of cost
recovery: The recommended adjustments to achieve this result
include: building permit fees (13%); file search fees (55%);
unit-based electrical and gas (4%); and fees related to hourly
inspection services (9%). In addition, the Directors recommend a
normal inflationary increase of 1.0% in all unit-based trade
permit fees to account for cost increases in 1997. Further, the
Director of Permits and Licences proposes introduction of new
fees related to fire pump inspections.
Staff propose to report back on trade permit fees as part of the
service improvement recommendations associated with the
Development and Building Review.
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