1. Building Fees and Distribution of FundsREPORT TO:
SUBJECT:
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The Honorable Mayor Kennedy and City Council
Craig Kerzman, Building Official
James H. Patrick, City Manager
Discussion of Building Permit Pees
MEETING DATE: April 18, 2005
BACKGROUND: The Kalispell Building Department has been collecting building permit
fees based on the 1988 Uniform Building Code and an assigned cost of construction that is well
below the current actual cost of construction. The City Manager asked me to look into the
impact of assessing building value based on current construction costs and a more recent fee
structure. To that end a summary sheet was produced that makes projections based on the
construction that occurred in 2004. I have included for your information and review a copy of
the letter and summary sheet that was previously provided to the City Manager.
RECOMMENDATION: I recommend the City Council discuss the building permit fee
structure and give their direction to City staff whether or not to implement any changes.
FISCAL IMPACT: It depends on which, if any, changes are implemented.
ALTERNATIVES: As suggested by Council.
Respectfully submitted,
Craig Kerzman James H. Patrick
Building Official City Manager
Date prepared: April 13, 2005
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Date: March 18, 2005
To: James H. Patrick City Manager
From: Craig Kerzman, Building Official
RE: Increased fees/Increased revenue
Part of the discussion of the upcoming reorganization and budget preparation involved the
question of raising fees. There are three methods available to the City to generate more
revenue. Each method could be employed independently or the three could be combined.
Based on past practice, two of the three methods could be implemented administratively
while the third method or a combination that includes the third method would require
amending existing ordinances. Building permit data from 2004 was used as the basis from
which the financial impact of each method was calculated.
My January 22, 2005, memo to you described how the valuation of residential
construction is calculated. One method to increase revenue is to fairly increase the project
valuation. When the higher valuation is applied against the existing 1988 UBC fee table a
higher fee results. This administrative change would generate additional revenue from
residential permits but would not change commercial permit revenue because most of the
project values used for commercial and multifamily projects are based on the contract bid
and are not calculated based on the size of the building.
Residential construction is currently valued at $61.50 for the living space and $15.50 for
the garage area. Based on sales prices shown in real estate listings, contractor input and
the valuations established by the International Codes Council, the square foot costs would
be more accurate if they were set at $85.00 per square foot for the living space and $25.00
per square foot for the garage area. For your information, Whitefish and Columbia Falls
use $112.00 per square foot for the living area and $30.00 per square foot for the garage.
A 1500 square foot home with a 460 square foot attached garage is currently valued at
$99,380 and has a base fee of $639.50. The more accurate construction costs yield a
valuation of $139,000 and a base fee of $776.00. Applying this change to residential
construction would generate about $60,000 per year, split $35,000 to building, $12,000 to
zoning and $13,000 to fire prevention. See Table 2.
The second method of generating revenue would be to collect a plan review fee for each
residential permit issued. The current practice is to collect a plan check fee for each
commercial and multifamily permit and the `first plan through' for repetitive residential
floor plans. Contractors have the option to have their repetitive floor plans checked by the
State, which not only generates no revenue for Kalispell but greatly complicates the
review, permitting and inspection process. In an effort to keep the plans check at the local
level the plans have been checked free of charge. Collecting a plan check based on the
current valuation and current fee schedule would cost $415.68 for the average home and
generate $135,000 per year. Applying the higher cost of construction but retaining the
existing fee schedule would yield a plan check fee of $504.40 per home or $164,000 for
the year. Applying both the higher valuation and the 1997 UBC fee schedule would result
in a plan check fee of $782.00 per average home or $254,000 annually. All plan check
revenue remains in the building department. See Table 1.
A third method of generating additional revenue is to adopt the 1997 UBC fee schedule.
To adopt the 1997 fee schedule Ordinances 1291, 1301 and probably others would have to
be amended. The 1997 fee schedule is about 55% higher than the 1988 UBC fee schedule
and would generate 55% more revenue. Further, since the plan check fee has been set at
65% of the building fee, an increase in the base fee also yields an increase in the plan
review fee. Adopting the 1997 UBC fee schedule would impact all permits, including
commercial and multifamily and would not just affect the residential. Using higher
valuations and the 1997 fee schedule for the 1500 square foot house and 460 square foot
attached garage would result in a base fee of $1202.80 (currently $639.50). This amount
does not include a $782.00 plan check fee. It is anticipated that using adjusted valuations
and the 1997 fee schedule would result in increased revenue of $232,000 (split $134,000
building, $46,000 zoning, and $52,000 fire prevention) for residential (Table 1) and
$74,000 (split $42,000 building, $15,000 zoning and $17,000 fire prevention) for
commercial (Table 3). To change the way the base fee is split Ordinances 1419 and 1292
would have to be amended.
If the City had been using the higher valuation and the 1997 fee schedule for all of 2004
the base fee would have been about $692,000, divided between building, zoning and fire,
and a plan review fee on each and every project would have produced another $402,000.
The numbers are general estimates and are based on a robust year of residential
construction. Like most construction costs the fees are pass -through costs and wind up
being paid by the property owner or purchaser. Any increase, no matter how reasonable
or justifiable, is likely to be viewed negatively by the construction industry and their
clients. if you decide to implement any or all of the methods, in whole or in part, please
advise us so that we can effect the necessary software changes and disseminate the
information to our contractors so they may include it in their bids.
Attach: Tables
Cc: Randy Brodehl, Fire Chief
Tom Jentz, Tri-city Planning Director
Table 1
WHAT IF IN 2004...
RESIDENTIAL
Current Fee
1119m,
Schedule
($61.50L & $15.50G)
$ 37,91 T,148.50
$ 2,492,679.00
$ 4fl,409,$27.50
$ 252,616.D0
$ 145,5Afi.82
$ 50,523.20
$ 56,585.98
Modified'88
($85L & $25G)
$ $2,405,815.00
$ 4,020,450.00
$ 56,426,265.00
$ 312,826.00
$ 180,187.78
$ 62,565.20
$ 70,073.02 $ 203,336.90
Modified '97
('88Fees x1.55%)
$ 52,405,815.00
$ 4,020,450,00
$ 56,426,265.00
$ 484,680.30
$ 279,291.05
$ 96,976.06 $ 108,613.19
$ 315,172.20
Table 3 COMMERCIAL
Current Fee
Schedule
(1988) $ 42,045,983.83 $ 133,580.00 $ 76,942.08 $ 26,716.OD $ 29,921.92 $ 55,660.48
Is
Fee Schedule $ 42,045,983.83 $ 207,049.00 $ 119,2fi0.22 $ 41,409.80 $ 46,378.98 $ 86,273.74