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Leon County
Board of County Commissioners Agenda Item#14 February 8, 2022 |
| To: | Honorable Chairman and Members of the Board |
| From: | Vincent S. Long, County Administrator |
| Title: | Building Plan Review and Inspection User Fee Study and Fee Resolution |
| Review and Approval: | Vincent S. Long, County Administrator |
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Department/Division Review and Approval: |
Alan Rosenzweig, Deputy County Administrator Ken Morris, Assistant County Administrator Barry Wilcox, Director, Development Support and Environmental Management Scott Ross, Director, Office of Financial Stewardship |
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Lead Staff/ Project Team: |
Scott Brockmeier, Chief Development Resources Officer Justin Poole, Director of Building Plans Review and Inspection |
Statement of Issue:
This item presents the findings and recommendations of the MGT Consulting Group’s Building Plan Review and Inspection User Fee Study and seeks adoption of the revised Building Plans Review and Inspection Fee Resolution with an effective date of June 1, 2022. The fee study recommendations and proposed Fee Resolution will improve transparency, further simplify the process of calculating building permit fees, and ensure the Building Plans Review and Inspection Division maintains an appropriate Fund balance in accordance with Florida Statutes.
Fiscal Impact:
This item has a fiscal impact to the County. The MGT Building Fee Study finds that the County’s existing fees are reasonably priced and self-supporting as the County’s plans review and inspection services do not require general revenue subsidies. The development community is supportive of the proposed fee schedule and structure which will cost most applicants the same or slightly less in new construction permit fees. For the County to support customer demands for greater digital services which require costly expenditures for permitting software and technology improvements, the MGT Building Fee Study recommends the creation of a new technology fee which is estimated to generate $80,000 annually dedicated to digital enhancements.
Staff Recommendation:
See next page.
Staff Recommendation:
Option #1: Adopt the proposed Resolution amending the Building Plans Review and Inspection Fee Schedule (Attachment #1) and accept the findings and recommendations of the MGT Consulting Group’s Building Plan Review & Inspection User Fee Study for Leon County (Attachment #2).
Report and Discussion
Background:
This item presents the findings and recommendations of the MGT Consulting Group’s Building Plan Review and Inspection User Fee Study (MGT Building Fee Study) and seeks adoption of the revised Building Plans Review and Inspection Fee Resolution (Fee Resolution) with an effective date of June 1, 2022. Permit fees support the operation of the Building Plan Review and Inspection Division which is charged with overseeing the effective and safe enforcement of the Florida Building Code. Florida Statutes require local governments to demonstrate fiscal stewardship by collecting fees consistent with the provided permitting services. Local governments utilize fee studies to document the reasonable costs for their permitting and inspection process, examine the best practices, and identify preferred methodologies for calculating permit fees. The MGT Building Fee Study recommendations and proposed Fee Resolution will improve transparency, further simplify the process of calculating building permit fees at the time of submittal, and ensure permit revenues will continue to support plan review and inspection services without the need for general revenue subsidies.
On October 15, 2019, with the support of local development stakeholders, the Board directed staff to modify the current building permit fees structure in a two-phased approach. At that time, the Board approved the first phase by adopting a resolution which provided a flat fee methodology for residential permits based on the square footage of a residential unit. This new methodology expedited the plan review process and simplified how fees were calculated for residential new construction. Commercial permitting fees tend to be more complex and since Leon County had not conducted a comprehensive building permit fee study since 2004, the second phase called for a fee study by a private consultant to evaluate expanding the flat fee methodology for commercial permits and construction trades and to ensure permit fees are properly set to recover the cost of the Building Plan Review and Inspection Program. MGT Consulting Group was selected to conduct the study and analyses through a competitive solicitation process.
Staff and MGT consultants have received input and support from industry representatives through the County’s Advisory Committee on Quality Growth and the Building Industry Association of the Big Bend (formerly the Tallahassee Builders Association) on the study findings and recommendations. In summary, this item recommends the Board adopt the proposed building permit fee resolution with the effective date of June 1, 2022, which implements the following MGT Building Fee Study recommendations:
The Development Support and Environmental Management (DSEM) Department’s Building Plan Review and Inspection (BPRI) Division is responsible for overseeing the effective and safe enforcement of the Florida Building Code (FBC) through local permitting and inspections pursuant to Section 553.80, Florida Statutes (F.S.). The permitting and inspection process provides assurance to property owners and residents that buildings and structures have been reviewed and inspected for compliance with the applicable building, life/safety codes, local ordinances, environmental and flood protection requirements. A building permit, plan review and inspections are required for new construction, renovations, the installation of heating and cooling systems, gas, plumbing, and electrical work.
Local governments may provide a schedule of fees, as authorized by Sections 125.56(2) and 166.222, F.S., for the enforcement of the provisions of the FBC. The BPRI Division is funded through an “special revenue fund” which is a unique account devoted to support the operation of the BPRI Division and is funded solely through local permit fees. The special revenue fund also serves to maintain a reserve to be used exclusively for the enforcement of the FBC through plan review, inspections, permit processing, administration, and enforcement. The objective of the special revenue fund is to fully support the function of the Division without the need to subsidize its operation through general revenue funding.
The last DSEM building fee study was conducted in 2004 and was implemented in stages from 2005 through 2007. The previous fee study was conducted by Maximus and attempted to incorporate the full cost for services to maintain the self-supporting enterprise revenue fund but did not consider methodological enhancements for fee calculation. The Maximus fee study recommended an increase in fees to recover the cost of services for processing and reviewing permit applications; however, the Board ultimately adopted a fee increase of a lesser amount as the result of public outreach and discussions with stakeholder groups.
At its October 2019 meeting, the Board approved implementation of a two-phased approach to modify the current building permit fee structure. The first phase was implemented with the adoption of the “flat fee” methodology for residential permits. The “flat fee” methodology calculates fees based on the gross building square footage of a proposed residential unit. The current “flat fee” of $0.80 per square foot for one- and two-family residential permits was adopted by Resolution No. 19-44 in October 2019 and has resulted in time savings by reducing the number of calculations required to determine building fees. Previously, residential permit fees were based on the valuation of a proposed structure and improvements. Sub-trade fees were calculated separately by adding individual appurtenances such as light switches, fans, outlets, etc. The “flat fee” method has not only reduced the amount of time necessary to itemize individual components of each building permit application, it also provides greater certainty and transparency for contractors and homeowners.
The second phase began in December 2019 when DSEM released a Request for Proposals (RFP) to solicit a consulting firm to conduct the fee study. In January 2020, the bid for consulting services was awarded to MGT. The primary objectives of the fee study included:
Since January 2020, staff has worked with the consultant to collect and analyze data for each of the BPRI activities. The associated cost of providing each service, including time estimates and volume activity, was entered into the consultant’s analytical model to calculate the recommended fee adjustments. This item seeks implementation of the second phase of the fee study which focuses on simplified fee methodologies for the remainder of the fee schedule.
Analysis:
This item builds on the actions taken by the Board in October 2019 to modify the County’s building permit fee structure in a two-phased approach. Local governments utilize fee studies to document the reasonable costs for their permitting and inspection process, examine the best practices, and identify preferred methodologies for calculating permit fees. The flat fee methodology adopted by the Board in October 2019 for new single family home construction has been well received by builders for its simplicity and predictability when calculating permit fees. The MGT Building Fee Study recommendations seek to replicate the success of the flat fee methodology by applying it to commercial construction permits and using a single flat fee for all sub-trade permits. The County’s current method of calculating commercial permit fees relies on determining the valuation of the structure without consideration to the type of commercial construction or the associated intensity of plan review and inspections. This results in fees that are sometimes disproportionate with the services provided. As described later in this analysis, local development stakeholders are supportive of the proposed recommendations and Fee Resolution.
The MGT Building Fee Study finds the County’s overall permit costs to be commensurate with the services provided by the BPRI Division for plans review and inspections. The proposed Fee Resolution revises the methodology for assessing permit fees to provide a simplified, fair, and transparent fee structure which eliminates all occurrences of valuation-based fees. This includes the elimination of each minimum sub-trade (electrical, mechanical, gas and plumbing) permit fee in favor of a single minimum “flat fee” for all sub-trade permits. Reducing the number of fee types further increases permitting efficiencies and benefits the customer when estimating permit fees.
For commercial permits, the creation of a tiered fee structure is recommended based on occupancy classification which will result in a more accurate fee assessment that is reflective of the cost of services. The proposed fee schedule and transition to a flat fee structure are designed to be revenue neutral to the County ‘building fund’ and continue to support the BPRI Division without the need for general revenue support. As proposed, over 90% of all commercial permits are anticipated to cost the same or slightly less under the new Fee Resolution.
Common among local governments in Florida, the MGT Building Fee Study also recommends the creation of a new technology fee to support customer demands for greater digital services and help offset expenditures related to permitting software and technology improvements, maintenance, and support. The new technology fee is estimated to generate $80,000 annually which would be set aside in a separate capital improvement program account dedicated to technology purchases, digital enhancements and support services.
The following sections summarize the findings and recommendations of the MGT Building Fee Study.
Cost Recovery
Section 553.80, F.S., requires that jurisdictions demonstrate fiscal stewardship and best practices by collecting fees consistent with the level of services provided. The Statute also requires that local jurisdictions establish a schedule of fees which are limited to the level of service provided in carrying out the administration, plan review, inspection, enforcement and overhead costs. The County’s permit fees sustain the special revenue fund (commonly referred to as the building fund) which supports the BPRI Division without requiring subsidies from general revenue funds. MGT evaluated the time and hourly costs associated with permit intake, plan review, and inspections and determined current permit fees recovered 97% of the cost of services for FY 2021. The MGT Building Fee Study finds that the current fees are established at an appropriate level and sufficient in recuperating the cost of plans review and inspection services provided by the BPRI Division.
The MGT Building Fee Study provides two recommendations relating to plan review fees that are customary for most jurisdictions and will enhance the County’s recovery of costs. The first recommendation is to separate plan review fees from inspection fees. The second recommendation is for the County to collect the plan review fees at the time of permit application. Currently, plan review fees and inspection fees are combined and collected at the time a permit is picked up, after the services are rendered. Implementing this recommendation will enhance the County’s recuperation of costs for services provided, as oftentimes permits are not picked up by applicants and final permit fees are not paid. Additional benefits associated with these recommendations are described later in this analysis related to applicants that choose to utilize private consultants for plans review and inspection services.
Fee Methodology
Based on the new flat fee methodology for residential permits, customers can easily determine the total cost of their residential building permit prior to filing the application. While efficiencies have been gained in determining residential permit fees, MGT established that the County’s current method for calculating commercial permit fees is too complex. MGT recommends the commercial permit fees be converted to a flat fee methodology similar to the one used for residential permits.
Currently, the County’s method of calculating commercial permit fees relies on determining the valuation of the structure without consideration to the type of commercial construction or the associated intensity of plan review and inspections. This results in fees that are sometimes disproportionate with services provided. The MGT Building Fee Study recommends this be addressed by dividing commercial structures into separate categories or “tiers” based on FBC occupancy classifications. With each tier, fees will adequately cover the amount of review and inspection. As illustrated in Table #1, the first commercial tier (Factory, Storage, Utility) involves the least intensive plan review and inspections as the result of the least amount of expenditure of services. Inversely, the fourth tier (Assembly, Educational, High-Hazard, Institutional) includes structures that require the most intensive review and inspection. For example, a simple commercial storage building (Tier 1), which has four walls, a roof and a concrete slab, and requires minimal plan review and inspections, would currently be assessed the same fee as an assembly or high-hazard building (Tier 4) that requires intensive plan review and inspections.
Table #1: Proposed Tiered Fee System – Plans Review and Inspection Fees per Square Foot
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RESIDENTIAL Fees per sq. ft. |
COMMERCIAL Fees per sq. ft. |
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One and Two-Family |
Tier 1 |
Tier 2 |
Tier 3 |
Tier 4 |
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Single-Family, Townhouses, Duplexes |
Factory, Storage, Utility |
R1, R2 (Includes Multifamily), R4 |
Business; Mercantile |
Assembly, Educational, High-Hazard, Institutional |
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|
Plan Review |
Inspection |
Plan Review |
Inspection |
Plan Review |
Inspection |
Plan Review |
Inspection |
Plan Review |
Inspection |
|
$0.41 |
$0.38 |
$0.28 |
$0.40 |
$0.46 |
$0.40 |
$0.48 |
$0.44 |
$0.52 |
$0.46 |
|
Total |
$0.79 |
Total |
$ 0.68 |
Total |
$0.86 |
Total |
$0.92 |
Total |
$0.98 |
The MGT Building Fee Study also recommends creating a distinct commercial tier unique to multifamily construction. The current fee schedule does not clearly categorize multifamily under commercial or residential which has led to confusion. The Florida Building Code specifically classifies multifamily as commercial due to more intensive reviews required to meet safety requirements. Similar to commercial permits, multifamily permits are reviewed for various fire, accessibility, and life, health, and safety requirements. The creation of a tier and fee category specific to multifamily permits will create consistency with FBC classification, eliminate confusion, and provide transparency for applicants.
In addition to the restructuring of commercial permit fees, the MGT Building Fee Study concluded that the removal of complex and labor-intensive itemization methods is required in order to provide a simplified, flat fee assessment. The analysis also factored the estimated time to perform the work of projects to assist in the determination of the individual cost of services for the intake, plan review, and inspections associated with a permit. The miscellaneous and fixed price permits were also evaluated and updated where appropriate.
Table #2 compares the current and proposed fee structure for two typical types of new construction permits. The separation of plans review and inspection fees, as well as elimination of the stated valuation-based method for determining fees, are two of the key components of the recommended fee structure. For the commercial permit, the proposed Tier 3 fee schedule is compared to the current commercial new construction fees. Tier 3 projects would include gas stations and retail stores which represents the majority of the County’s new construction commercial permits.
Table #2: Current vs Proposed Fee Structure
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SINGLE-FAMILY RESIDENTIAL |
BUSINESS & MERCANTILE COMMERCIAL (Tier 3) |
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Current |
Recommended |
Current |
Recommended2 |
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Size |
2,500 sq. ft. |
2,500 sq. ft. |
3,000 sq. ft. |
3,000 sq. ft. |
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I |
Building |
$0.46 |
$1,150 |
$0.15 |
$375 |
$0.51 |
$1,530.00 |
$0.15 |
$450 |
|
Mechanical |
$0.10 |
$250 |
$0.06 |
$150 |
$0.10 |
$300.00 |
$0.09 |
$270 |
|
|
Electrical |
$0.12 |
$300 |
$0.09 |
$225 |
$0.12 |
$360.00 |
$0.12 |
$360 |
|
|
Plumbing |
$0.07 |
$175 |
$0.04 |
$100 |
$0.07 |
$210.00 |
$0.06 |
$180 |
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|
Gas |
$0.05 |
$125 |
$0.04 |
$100 |
$0.05 |
$150.00 |
$0.02 |
$ 60 |
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Plan Review1 |
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|
$0.41 |
$1,025 |
Stated Valuation3 |
$104.43 |
$0.48 |
$1,440 |
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Total |
$0.80 per sq. ft. |
$2,000 |
$0.79 per sq. ft. |
$1,975 |
$0.85 per sq. ft. |
$2,654.43 |
$0.92 per sq. ft. |
$2,760 |
|
1
1. Currently, the residential plan review cost for service is included in the building inspection fee.
2. The commercial category will be divided into four Tiers to reflect the different levels of cost of services for plan review and inspections. Business and Mercantile is Tier 3 and represents the majority of commercial permits.
3. A stated valuation of $458,000 was calculated using ICC (International Code Council) Building Valuation Data (BVD).
As proposed, over 90% of all commercial permits (Tier 1, Tier 2, and Tier 3) are anticipated to cost the same or slightly less under the new Fee Resolution.
Private Provider Fee Reduction
Modifications to Section 553.791. F.S., in 2018 created the ability for owners and contractors to use private providers to perform plan review and/or inspections associated with building permits. Each jurisdiction is required by Statute to provide a reduction in the permit cost in instances when private providers are utilized. However, Florida Statutes still requires County involvement to process the permit, obtain required documentation, ensure the private provider has insurance for professional liability policy, perform inspections, enter the inspections into the permitting system, ensure the project is in compliance, ensure all required inspections have been completed and approved, and issue the Certificate of Occupancy or Completion. In January 2021, the Board approved an amendment to Chapter 5 of the Leon County Code of Laws providing a 60% fee reduction when applicants utilize private providers.
Considering the amount of administrative work and inspections that the BPRI Division must still perform, the MGT Building Fee Study supports the 60% fee reduction when private providers are utilized, to ensure cost recovery for services provided by the County. The aforementioned recommendations to separate plan review fees from inspection fees and to collect the plan review fees at the time of permit application will allow for simple calculations when applicants choose to use private consultants and seek fee reductions in compliance with Section 553.791. F.S. Private provider cost savings will be reflected in the revised fee schedule.
Fee Comparison
At the County’s request, and as included in the RFP for this study, MGT was tasked with providing a review and comparison of permit fees for peer local governments in Florida: Alachua, Bay, Lake, Manatee, Osceola, Sarasota, and St. Lucie Counties, as well as the City of Tallahassee. The fee comparison sought to identify best practices regarding permit fee structure, methodologies, and collection practices. MGT gathered the data and cautioned against giving much consideration to comparisons of the permit fee rates by jurisdiction due to discrepancies in how other building departments are funded and what services are included with each permit. For example, three of the eight jurisdictions in the study are not entirely self-supported through building permit fees. Subsidizing building department services with other revenue sources allows a local government to maintain lower permit fees. Another example is permit volume and the number of commercial permits which tend to generate higher fees and help off-set any shortfalls in revenue. Of the jurisdictions surveyed, Leon and St. Lucie Counties were the only jurisdictions that do not require a separate permit fee for the certificate of occupancy. And finally, an examination of permit fees does not capture the full cost of new development borne by the applicant such as levying of impact fees.
With the exception of Leon County and the City of Tallahassee, all of the jurisdictions included in the study assess minimum impact fees that range between $2,800 - $22,000. Impact fees are one-time fees collected by local jurisdictions from developers or builders for new residential and commercial developments. Pursuant to Section 163.31801, F.S., impact fees are only to be used for the funding of capital facilities proportional and reasonably connected to the increased impact generated by new residential or commercial construction. Capital facilities commonly funded through impact fees include roads, parks, schools, water/sewer utilities and emergency services.
All of the jurisdictions use a variety of methods to calculate permit fees, including square footage, valuation, or a mixture, based on typical time requirements. Fee calculation and methodologies used by most jurisdictions in the peer group proved complex, time consuming and often lacked transparency. The only significant difference in fees pertained to the prevalence of minimum permit fees. Of the jurisdictions surveyed, Leon County is the only jurisdiction that does not assess a minimum permit fee for all types of projects. For projects based on square footage, the current methodology is to assess the fees at the rate outlined in the fee schedule. For example, a 70 square foot bathroom addition permit that includes all the subtrades would only cost $52.50. A permit with fees that low does not allow the County to recuperate the cost of services.
The proposed minimum permit fee ensures the County recuperates the cost of services associated with the intake processing, plan review, issuance, and inspection of permits, regardless of the size of the project. Table #3 summarizes the comparative findings of the peer group with the recommended Fee Resolution. The Appendix section of the MGT Building Fee Study provides graphs with comparative data on the peer group.
Table #3: Permit Fee Comparison Summary
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LEON COUNTY |
PEER |
% DIFF |
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|
Single-Family Construction |
$ 1,885 |
$ 1,859 |
+1.4% |
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ex. $371,000 valuation; 2,500 sq. ft. |
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|
|
|
|
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Multi-Family Construction |
$ 14,530 |
$ 14,163 |
+2.5% |
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ex. $2,300,000 valuation; 17,000 sq. ft. |
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|
|
|
|
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Commercial Construction |
$ 9,510 |
$ 9,853 |
-3.6% |
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ex. $1,800,000 valuation; 12,000 sq. ft. |
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|
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Minimum Residential Building Permit |
$ 135 |
$ 118 |
+12.6% |
|
Minimum Commercial Building Permit |
$ 135 |
$ 210 |
-55.6% |
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* For comparative purposes, certificate of occupancy fees was not included for Leon and St. Lucie Counties. |
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Fee Maintenance
Technology Fee
The establishment of a technology fee in conjunction with a building permit is common practice in Florida. Typical technology fees for jurisdictions in Florida range from 2% to 4% of the total permit fees. As the building permit application and review process has transitioned from paper to digital, it has become necessary to increase investment in permitting software and technology on an ongoing basis. The technology fee is used by many Florida jurisdictions to help offset the ongoing need to improve technology with the goal to provide the most information to the customer in a simple manner. Online building permit applications and plan review increases opportunities to enhance services by improving collaboration with customers, creating additional transparency and convenience, and increasing efficiency by reducing review times.
The expansion of digit services including the purchase, licensing, and ongoing maintenance of permitting software are costly investments designed to improve the customer experience. The MGT Building Fee Study recommends that Leon County implement a technology fee to help support the continued improvements of automating and updating the permitting process, with a focus on providing real time communication to the customer. Spending for technology upgrades was up 14% alone during Fiscal Year 2020 to enhance service delivery due to software purchases and required modifications. Continued costs of technology upgrades will be an ongoing concern requiring a dedicated funding source without relying on the County’s general revenue fund. A technology fee of 3% of permit costs is recommended and will generate an estimated $80,000 annually to offset future software and technology improvements, maintenance, and support.
A separate capital improvement program account will be established for the technology fee. This will isolate the fee revenues to ensure transparency and accountability while supporting the BPRI Division’s technology needs and customer service enhancements.
Inflation Adjustment
The County has not conducted a building permit fee study since 2004. MGT recommends the County conduct a building permit fee study every five years, which is common practice in Florida, in conjunction with using the Consumer Price Index inflation adjustment to monitor building permit fees and the recovery of associated costs. The monitoring of fees will help prevent the possibility of using the general fund to subsidize the special revenue fund. Adjustments to the permit fees for inflation in the market may be beneficial until such time another building permit fee study is performed, however, the Fee Resolution does not provide for automatic inflation adjustments. Periodic analyses of the fees will ensure the special revenue fund continues to be self-supportive and any future fee adjustments will be brought back to the Board for consideration.
Special Revenue Fund Balance
The County’s permit fees sustain the special revenue fund (commonly referred to as the building fund) which supports the plans review and inspection services provided by the BPRI Division without requiring subsidies from general revenue funds. The surge in construction over the last several years has resulted in local governments amassing large fund balances from permit fees in these specialized accounts. The build-up of these special revenue fund balances resulted in a mandate in 2019 from the Florida Legislature that these fund balances not exceed the average of a building department’s operating budget for the previous four fiscal years. Any amount exceeding this limit must be used as authorized or rebated with a reduction of fees. MGT found Leon County’s fund balance meets the criteria at 51 percent of the allowable limit based on the BPRI Division’s operating budget over the previous four fiscal years.
Routinely examining the costs of providing fee related services and making deliberate decisions about the recovery of costs and fee modifications will help the BPRI Division maintain its fiscal sustainability and respond to the changing needs of citizens, changes in regulations, and changes in the local, regional and national economies. The MGT Building Fee Study recommends the Office of Financial Stewardship continue to review the fund balance on a quarterly basis to ensure an adequate balance remains in place within the allowable limits established by Statute.
Conclusion
The MGT Building Fee Study finds the County’s overall permit costs to be commensurate with the services provided by the BPRI Division and provides recommendations for a simplified, fair, and transparent fee structure which eliminates all occurrences of valuation-based fees. The proposed Fee Resolution creates a tiered system for commercial permits that will result in a more accurate fee assessment that is reflective of the cost of services. It will also eliminate each minimum sub-trade (electrical, mechanical, gas and plumbing) permit fee in favor of a single minimum flat fee for all sub-trade permits. Reducing the number of fee types further increases permitting efficiencies and benefits both the customer and staff when estimating permit fees.
The proposed fee schedule and transition to a flat fee structure are designed to be revenue neutral to the County ‘building fund’ and continue to support the BPRI Division without the need for general revenue support. The MGT Building Fee Study also recommends the creation of a new technology fee to support customer demands for greater digital services and help offset expenditures related to permitting software and technology improvements, maintenance, and support. The new technology fee is estimated to generate $80,000 annually which would be set aside in a separate capital improvement program account dedicated to technology purchases, digital enhancements and support services.
Staff and MGT consultants have received input and support from industry representatives through the County’s Advisory Committee on Quality Growth and the Building Industry Association of the Big Bend (formerly the Tallahassee Builders Association) on the study findings and recommendations. An email in support of the study and recommendations from the Chairman of the Governmental Affairs Committee for the Building Industry Association of the Big Bend is provided as Attachment #3.
Staff recommends the Board adopt the proposed building permit Fee Resolution with the effective date of June 1, 2022, which implements the following MGT Building Fee Study recommendations:
Options:
Recommendation:
Option #1
Attachments: