HomeMy WebLinkAboutFIN 09-18DICKERING
Report to
Executive Committee
Report Number: FIN 09-18
Date: May 7, 2018
From: Stan Karwowski
Director, Finance & Treasurer
Subject: 2017 Building Permit Stabilization Reserve Fund
Recommendation:
1. That Report FIN 09-18 of the Director, Finance & Treasurer be approved;
2. That Council authorize a transfer of $83,440 to the Building Permit Stabilization
Reserve Fund (Account #7506);
3. That Council authorize a transfer of $83,440 from the Building Permit Stabilization
Reserve Fund to the Rate Stabilization Reserve (Account #7021); and
4. That the appropriate City of Pickering officials be authorized to take the necessary
actions as indicated in this report.
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, 2017.
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 service costs, fees and legislative requirements and to develop an Activity
Based Costing (ABC) model for the City. Using this information, Watson 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
FIN 09-18 May 7, 2018
Subject: 2017 Building Permit Stabilization Reserve Fund Page 2
revenues. Without such a reserve fund, reduced growth and permit volumes during a
downturn could result in severe budgetary pressures which could impair the City's ability
to enforce the Act and the Building Code.
The Act requires that an annual report be prepared that includes total fees collected in
the previous 12 month period and a summary of directly and indirectly related
administrative costs.
Due to the relatively low rate of development since the fund was established in 2006,
the accumulated shortfall for this reserve fund as of December 31, 2016 was $4.69
million. However, due to an excess of revenues over costs in 2017, the accumulated
shortfall can be reduced by the excess of revenues in the amount of $83,440,
translating into a revised accumulated deficit figure of $4.61 million.
Annual Report — Building Permit Fees
for the year ended December 31, 2017
Building Permit Revenue $2,111,795
Costs:
Direct Costs $ (1,489,508)
Indirect Costs (538,847)
Excess (Shortfall) Revenue Over Costs
(2,028,355)
$ 83,440
Building Permit Stabilization Reserve Fund
Opening Balance, January 1, 2017 $ -
2017 Contribution 83,440
Transfer to the Rate Stabilization Reserve (83,440)
Closing Balance, December 31, 2017 $ -
Transfer to the Rate Stabilization Reserve — Recommendation 1 b)
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 Reserve Fund and these funds are used to cover
any future operating shortfall in their Building Services section. As stated above —
Pickering has 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. The Building Services section for Pickering required a financial subsidy from
the taxpayer to fund their operations. Starting in 2006 and up to December 2016, this
financial subsidy was $4.69 million. From a financial perspective, this subsidy was
funded from the Rate Stabilization Reserve. The financing strategy is to reduce this
deficit (subsidy) over time by transferring the Building Services operating surplus to the
Rate Stabilization Reserve. Recommendation 1 b) transfers the 2017 surplus funds to
the rate stabilization reserve and reduces the deficit.
FIN 09-18
May 7, 2018
Subject: 2017 Building Permit Stabilization Reserve Fund Page 3
Attachments: None
Prepared B
Paul dreamer
Senior Accounting Analyst, Internal Audit
Approved/Endorsed By:
Stan Karwowski
Director, Finance & Treasurer
Recommended for the consideration
of Pickering City Council
Tony Prevedel, P.Eng.
Chief Administrative Officer
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