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From
Subject:
Stan Karwowski
Director, Finance & Treasurer
Report to
Executive Committee
Report Number: FIN 07-17
Date: May 8, 2017
2016 Building Permit Stabilization Reserve Fund
Recommendation:
That Report FIN 07-17 of the Director, Finance & Treasurer be approved; and:
a) That Council authorize a transfer of $80,173 to the Building Permit Stabilization
Reserve Fund (Account #7506); and
b) That Council authorize a transfer of $80,173 from the Building Permit
Stabilization Reserve Fund to the Rate Stabilization Reserve (Account #7021).
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, 2016.
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
a small increase in building permit fees to provide for cost recovery and establishment
of a building permit stabilization reserve fund. The purpose of this reserve fund is to
provide a source of funds for current operating budget costs during an economic
FIN 07-17 May 8, 2017
Subject: 2016 Building Permit Stabilization Reserve Fund Page 2
downturn to offset lower building permit revenues. Without such a reserve fund,
reduced growth and permit volumes during a downturn could resulf 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, 2015 was $4.77
million. However, due to an excess of revenues over costs in 2016, the accumulated
shortfall can be reduced by the excess of revenues in the amount of $80,173,
translating into a revised accumulated deficit figure of $3.968 million.
Annual Report — Building Permit Fees
for the year ended December 31, 2016
Building Permit Revenue
Costs:
Direct Costs $ (1,896,652)
Indirect Costs (327,331)
Excess (Shortfall) Revenue Over Costs
$2, 304,156
(2,223,983)
$ 80,173
Building Permit Stabilization Reserve Fund
Opening Balance, January 1, 2016 $
2016 Contribution
Transfer to the Rate Stabilization Reserve �
Closing Balance, December 31, 2016
80,173
8( 0,173�
Transfer to the Rate Stabilization Reserve — Recommendation 1 b)
For the majority of municipalities, their Building Permit revenues are sufficient to cover
their direct and indirect operating costs. In addition, many of the municipalities have
excess funds that are transferred to their Building Permit Reserve Fund and these funds
will be 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 2015, this financial subsidy was $4.77 million. From a financial perspective,
this subsidy was funded from the Rate Stabilization Reserve. The financing strategy is
to reduce this deficiU(subsidy) over time by transferring the Building Services operating
surplus to the Rate Stabilization Reserve. Recommendation 1 b) transfers the 2016
surplus funds to the rate stabilization reserve and reduces the deficit.
FIN 07-17
May 8, 2017
Subject: 2016 Building Permit Stabilization Reserve Fund Page 3
Attachments: None
Prepared/Approved By:
Stan Karwowski
Director, Finance & Treasurer
Recom ded for the consideration
of Pick in City Council
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Tony Preve el, P Eng.
Chief Adminis ative Officer