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REQUEST FOR COUNCIL ACTION Date: October 7, 2019 Item No.:7.e Department Approval City Manager Approval Item Description:Discussion Regarding Building Permit Fees 1 B ACKGROUND 2 On August 20, 2019, the Housing Affordability Institute released a report claiming cities are 3 overcharging building permit fees, which drivesup the cost of a new home and partially contributes 4 to the housing affordability crisis. Just prior to release of this report, the City Council asked for a 5 discussion on building permit fees and how Roseville’s fees compare to other communities. In an 6 effort to provide context and clarity surrounding the broader topic of building permit fees, staff has 7 provided information related to a building permit fee analysis, the Housing Affordability Institute 8 study, and Roseville’s use of the Community Development Fund for review by Council. 9 10 Building Permit Fee Analysis 11 Building permit fees are based either by valuation of the project (as determined by the permit 12 applicant) or by flat fee. In accordance with the State Building Code, the State of Minnesota 13 establishes a baseline valuation calculator in Statute(326B.153), setting base permit fees depending 14 on the total cost to complete the work (including labor and materials). The valuation calculator is 15 based on the State’s level of service to process a permit. The State Building Code also provides for 16 certain permit types to be charged based on a flat fee in lieu of the valuation calculator. Flat fee permit 17 costs are determined based upon actual staff hours needed to process the permit, including 18 administration, overhead, plan review, and inspections. A few points worth noting as it relates to 19 valuation-based fees verses flat fees: 20 The valuation calculator established in Statute is based on what the State spends to process a 21 permit. The State only processes permits for public facilities and State licensed facilities 22 (schools, nursing homes, & hospitals). The State does not incur any expenses related to 23 planning, zoning, development, code compliance, or engineering, which are expenses cities 24 typically incur that needto be recovered (atleast partially) by building permit fees. 25 The State Building Code allows for cities to adopt a valuation calculator that defers from the 26 one provided in State Statute, as long as the City can demonstrate the revenue collected under 27 the State calculator is insufficient to cover expenses. In 2011, the City of Roseville raised the 28 valuation calculator based on analysis that fees were not wholly covering expenses. Factoring 29 in Roseville’s increase in 2011, and reduction by the State in 2018, on average Roseville’s 30 valuation calculator is 35% higher than the State’s. 31 Community Development staff annually examines our fees to ensure they are aligned with 32 the actual cost to provide the permit service. Through this exercise, Roseville has moved roof Page 1 of 4