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The short take: if you plan to build anything in the next year, go get your permit now!
The gory details: See this copy of the fee schedule from page 7 of the ordinance as posted by the city commission. This eight-bracket scheme replaces the simple previous schedule (Madison City Code Article I, Section 6-16.1e, available at the city site as of this publishing) which imposed a fee of $20 for the first $2000 of project value, plus $1 per additional $1000 of project value. If you are building a $100,000 house, you can purchase a building permit this week from the city for $118. Two weeks from today, that same permit will cost you $628.50.
Building bigger? Start a $500,000 dream house in Madison today, and you can get a permit for $518. Wait a couple weeks to file your application, and you'll pay $2,028.50. Uff da!
This lake resident hopes that the Lake County Commission won't feel the need to follow the example of their city counterparts. First off, Lake County maintains a simpler fee schedule. The base fee is $50 for the first $2000 of building value, plus $1 per additional $1000 of project value. Some quick calculations show that for projects under $4000 (like the deck and carport the Madville Times will continue working on as soon as the mud dries), building permits cost less in Madison than in the rest of the county. However, should we make any big additions to the Madville Times World Headquarters, we will save hundreds of dollars over comparable building in the city.
For those of you looking to move to Lake County, compare the permit costs for the above homes. A Lake County permit for a $100,000 cabin will cost you $148, less than a quarter of the impending fees for building in town. Build that swanky $500,000 house outside the city limits, and your building permit will cost $548, saving you $1,481 over permit costs in town. ($1,481 will buy you some nice silver cabinet fixtures for that new house.)
These numbers give the impression that Madison's new building permit fee structure might be a bit overpriced. But maybe it's unfair to compare city permit costs to rural permit costs. Let's compare Madison's building permit fees to those in a real metropolitan madhouse: Sioux Falls. Surely the money-hungry Sioux Falls City Council is cashing in on its residents' building desires more than Madison's City Council... right?
Wrong. As the fee comparison chart shows, under Sioux Falls's six-bracket permit fee schedule, the only thing you can build more cheaply in Madison than in Sioux Falls is a $500 doghouse (Madison building permit: $10; Sioux Falls building permit: $20). A permit to build a modest $100,000 house in Sioux Falls costs $433, awfully steep compared to Lake County, but still $195.50 cheaper than the same project in Madison come September 6. And that $500,000 house? The City of Sioux Falls will charge you $1,433 for the privilege of building it, a savings of almost $600 over the fee for a comparable building in Madison.
Looking past the blatantly exorbitant increases in fees, we find another distressing aspect of the new building permit fee schedule. If we assume that project value correlates with the income of the builder/owner, Madison's fees are basically regressive. Actually, when building permit cost is expressed as a percentage of building value, building permit fees in all three jurisdictions discussed here are regressive, charging a higher percentage of total value for cheaper projects.
But the multi-bracket scheme exacerbates the regressivity of the fees. The highest rates -- $9, $6.50, and $4.50 per thousand -- apply to the lowest building value amounts ($1-$25K, $25-50K, and $50-100K, respectively). The folks with more money to spend pay ever less per thousand that they decide to sink into their ever-bigger houses.
As reported here and in MDL [Chuck Clement, "City Transfers Land to Lake Area Improvement Corporation," MDL, 2007.08.07, p.1], the Lake Area Improvement Corporation is studying Madison's housing situation and intends to spend $100,000 to "develop local housing resources" [Clement]. If the LAIC and the city are serious about addressing the shortage of quality affordable housing in Madison, maybe it should make part of its strategy a restructuring of its building fee permit schedule.
Consider the benefits for lower- and middle-income folks if the city were to keep building permit fees for projects of $100,000 or less at the current levels (and scale the new schedule accordingly to avoid an abrupt jump in fees when building value hits $100,001). A family building a nice new starter home in town could save up to $480. That's big money for working-class budgets. Keeping building fees low, at least for modest projects, would mean one less barrier to creating more affordable housing in Madison.
Well, somebody's got to pay for the new Building Inspector and implementing all the new regulations. Madison is simply saying, "Don't build in town, build at the lake". If you build in town, Madison will sock it to you in building permit fees, hook-up deposits, electricity, water and sewer and garbage collection. There's a reason why five homes a year go up in Madison and 50 go up at the lakes each year. I disagree with your regressive theory as there is a basic internal cost to each building permit in staff time, and after that basic cost is covered, if you've got it to spend, they'll get you to pay. There is talk of progress, but nobody is saying, "What can we do as a community to add 100 homes in Madison next year?" How can we bring our City Commissioners, local contractors and subs together to do that? Now, that would be progress! We haven't added 100 homes in ten years in Madison.
ReplyDeleteThat fee schedule is the most idiotic thing I have ever read. Yikes!
ReplyDeleteFirst Anon makes a good point: my regressivity argument isn't perfect, since there is a basic cost of doing business that the city must recoup with each permit. But the city can recoup that basic cost with the flat starting fee, as it does now (and will until September 6) with the $20 initial fee. The county does the same with its $50 fee. That basic fee for all permit-purchasers unavoidably skews the regressivity curve.
ReplyDeleteBut once that basic cost is recovered, is there any need for the different brackets of per-thousand costs? Lower charges for the first thousand over a million than the first thousand over $25K heighten the regressivity. I have an e-mail out to the city finance office asking for an explanation of the genesis of that bracket system, and I welcome comment from other builders, inspectors, economists, or other folks in the know who could enlighten our readership.
You would think that a lower fee up front to encourage building would actually bring in more money over the long term in increased taxes for the new building.
ReplyDeleteOn the regressive topic - aren't other city services or "products" priced that way? I could be wrong, but it seems to me that there a similar scheme for electricity and water. So much for the first X gallons or KWH, then the price gets cheaper per gallon or KWH as you increase. The City of Madison's website has an electric rate ordinance online, but I couldn't find a water one in the limited time I had to browse. I always figured it was a buy-in-bulk discount.
ReplyDeleteI stand corrected - at least in the water department. It looks like a flat fee in the City's water rates.
ReplyDeleteElectric rates cheaper as you buy more -- Sioux Valley Energy (my utility out here in the country) works similarly. But a building permit is different from a city utility. You're paying for permission to do something with your property, plus the privilege of a visit from the city building inspector, who I assume comes to make sure you don't put your doors on backwards. For a $100K house, will that inspection service really require $628 worth of effort?
ReplyDelete