On Nov. 19 almost a year to the day of the situation described below a building permit has been issued for 14 units of a 60 unit complex for a value of $3,010,000. This works out to an average of $225,000 per unit. All the units are being presold and 4 have been sold so far, 3 at $397,500 and 1 at $424,500. Now this might not be a problem and I'm sure that City staff has vetted this permit using the existing policies re building permits. However the new policy that was under review in Feb. of 2007 has still not made it to council so this problem can be addressed? We are entering into the 2008 budget cycle and an estimation of impact on future building fee revenues is needed quickly !
History of this Problem:
Luxury condos for $100,000? Not likely.
On Nov 22, 2006 the above posting brought a problem to the scrutiny of Council: Highlights from that article are:City staff are reviewing how a luxury condo development got away with a bargain basement building permit.A permit worth $2.8 million was issued on Nov. 6 for a 28-unit condominium complex on Centennial Drive in downtown Vernon. Valued at only $100,000 per unit on the permit, the two and three bedroom condos are being sold off at prices starting from $239,000 per unit. But according to some city councillors this is not the first time a developer has secured a building permit for less than market value, said Coun. Juliette Cunningham. “I know there has been an issue in the past, that when you apply for a building permit it’s not reflective of the actual value,” said Cunningham. “If it’s being undervalued we have to look at why that’s happening.”In 2005, building permits brought in more than $1.1 million into the city’s coffers. Coun. Barry Beardsell said that if developers don’t pay proper value for permits, then residential taxes will have to be raised to make up for any budget shortfalls.
From CITY MAY REVAMP BUILDING PERMIT PROCESS posted Feb 16/07 :
Staff at Vernon City Hall are preparing a report that may recommend an overhaul of the building permit process. As reported in the Vernon Daily Courier in November, a review was launched after a 28-unit condominium development received an undervalued building permit from the city. “What we’re doing right now is a revision of the bylaw governing how fees are charged,” said planning, development and engineering manager Jeremy Kinch. Kinch said that the goal of the review is to ensure that developers are charged equally. One of the recommendations staff are considering is a provision to go back and charge an additional fee if the permit value turns out to be too low.
“We don’t currently have an explicit back charge,” he said. “We’re looking at equitable distribution of charges to people using the service.” A development of a project on Centennial Drive was given a building permit based on a $2.8 million construction value, but with the developer estimating a market value of $100,000 per unit some councillors felt that developers were getting away with too much of a bargain. The units were later sold at prices starting from $239,000 per condo. “If it’s being undervalued we have to look at why that’s happening,” said Coun. Juliette Cunningham in November.
-----------
EDITORIAL By Wylie, Vernon Courier same day:
The issue of undervaluing a project came to light in November, when we reported that a developer was given a building permit under the assumption the project was worth $2.8 million – placing a value of $100,000 on each condo. The units were later sold at $239,000 or higher, meaning the city charged far less for the building permit than what it was worth. Some city councillors said the developer was given too big a bargain. We agree. Permit fees are an important revenue source for the city. As Vernon grows, so too do the costs for things such as policing, fire protection, sewers, water, garbage removal, etc., and those costs fall on us, the taxpayers. Fees collected from developers are a way to offset those costs, so when the city loses out on money from permits because the project was undervalued, it will cost you more money in the long run. If the city can come up with a fair way to back charge where need be, taxpayers will be the beneficiaries of keeping developers honest.
------------------------------
at a Feb 20/07 posting Construction Value for Building Permits
Some cities described how they addressed this problem:
Among the 6 cities described were 3 that stood out:
Nanaimo
Building Permit Fees The charge for building permit is based on market value of the finished project
Sidney
The value of construction excluding land shall be the greater of:
(a)The contract price including taxes and a reasonable allowance for extras, or,
(b)The value as determined by the Authority having Jurisdiction based on fair market
value.
New Westminster
9.5 Each application for a building permit shall state the estimated market value of the proposed construction.
No comments:
Post a Comment