HomeMy WebLinkAboutFIN 19-23
Report to
Executive Committee
Report Number: FIN 19-23
Date: December 4, 2022
From: Stan Karwowski
Director, Finance & Treasurer
Subject: 2022 Building Permit Stabilization Reserve Fund
- File: F-4910-001
Recommendation: It is recommended that Report FIN 19-23 from the Director, Finance &
Treasurer regarding the 2022 Building Permit Stabilization Reserve Fund be received for
information.
Executive Summary: Section 7(4) of the Building Code Act (the “Act”) requires the City to
prepare an annual report of building permit and inspection fees and related administrative and
enforcement costs. This report fulfills the requirements of Section 7(4) of the Act. This report
also contains information about the City’s Building Permit Stabilization Reserve Fund.
Financial Implications: This report contains information pertaining to the financial status
of the Building Permit Stabilization Reserve Fund as at December 31, 20 21.
Discussion: In December 2005, Council approved Report PD 41 -05, which enacted a new
building permit process and fees under the Act. The Act requires permit fees to be accounted
for, and not used to subsidize City functions other than administration and enforcement of the
Act and the Ontario Building Code. Watson & Associates Economists Ltd. was retained to
undertake a comprehensive analysis of all Planning & Development costs, fees and legislative
requirements and to develop an Activity Based Costing (ABC) model for the City. Using this
information, Watson & Associates Economists Ltd. recommended an increase in building
permit fees to provide for cost recovery.
The purpose of the Building Permit Stabilization Reserve Fund is to provide a source of funds
for current operating budget costs during an economic downturn to offset lower building permit
revenues. Without such a reserve fund, reduced growth and permit vo lumes during a downturn
could result in severe budgetary pressures which could impair the City’s ability to enforce the
Act and the Ontario Building Code.
The Act requires that an annual report be prepared that includes the total Building Permit fees
collected in the previous 12-month period and a summary of directly and indirectly related
administrative costs.
FIN 19-23 December 4, 2023
Subject: 2022 Building Permit Stabilization Reserve Fund Page 2
For many years, the City experienced a relatively low rate of development since the Building
Permit Stabilization Reserve Fund was established in 2006. As a result, the accumulated
shortfall for this reserve fund as of December 31, 2021, was $2.48 million. Due to an excess of
building permit revenues over costs in 2022, the accumulated shortfall can be reduced by the
excess of revenues in the amount of $469,184, translating into a revised accumulated deficit
figure of $2.01 million for the Building Permit Stabilization Reserve Fund.
Annual Report – Building Permit Fees
for the year ended December 31, 2022
Building Permit Revenue $3,731,940
Costs:
Direct Costs $ (2,788,680)
Indirect Costs (474,076)
Capital Costs (3,262,756)
Excess (Shortfall) Revenue Over Costs $ 469,184
Building Permit Stabilization Reserve Fund
Opening Balance, January 1, 2021 $ -
2022 Contribution 469,184
Transfer to the Rate Stabilization Reserve (469,184)
Closing Balance, December 31, 2022 $ -
Transfers to the Rate Stabilization Reserve
For the majority of municipalities, building permit revenues are sufficient to cover direct and
indirect operating costs. In addition, many municipalities have excess funds that are
transferred to their Building Permit Stabilization Reserve Fund and these funds are used to
cover any future operating shortfall in their Building Services section. As stated earlier, up until
2017, Pickering had historically experienced a low level of construction activity that translated
into lower building permit revenues. For most municipalities, the budgeted and actual cost of
their Building Services section and/or department is fully funded from building permit revenues.
Historically, the Building Services section required a financial subsidy from the Pickering
taxpayer to fund their operations. As of December 31, 2021, the accumulated financial subsidy
or deficit was $2.48 million. From a financial perspective, this subsidy was funded from the
Rate Stabilization Reserve. The City’s financing strategy is to reduce this deficit (subsidy) over
time by transferring the Building Services operating surpluses to the Rate Stabilization
Reserve. In 2022, Building Services had an op erating surplus of $469,184 which was
transferred from the Building Permit Stabilization Reserve Fund to the Rate Stabilization
Reserve which further reduced the deficit.
FIN 19-23 December 4, 2023
Subject: 2022 Building Permit Stabilization Reserve Fund Page 3
Prepared By: Approved/Endorsed By:
Original Signed By: Original Signed By:
James Halsall Stan Karwowski
Division Head, Finance Director, Finance & Treasurer
Recommended for the consideration
of Pickering City Council
Original Signed By:
Marisa Carpino, M.A.
Chief Administrative Officer