HomeMy WebLinkAboutFIN 16-24Report to
Executive Committee
Report Number: FIN 16-24
Date: September 3, 2024
From: Stan Karwowski
Director, Finance & Treasurer
Subject: 2023 Building Permit Stabilization Reserve Fund
- File: F-4910-001
Recommendation:
It is recommended that Report FIN 16-24 from the Director, Finance & Treasurer regarding the
2022 Building Permit Stabilization Reserve Fund be received for information.
Executive Summary: The purpose of this report is to fulfill Section 7(4) of the Building
Code Act (the “Act”) which requires the City to prepare an annual report of building permit and
inspection fees and related administrative and enforcement costs.
Relationship to the Pickering Strategic Plan: The recommendation in this report responds
to the Pickering Strategic Plan Corporate Key to Deliver on Good Governance – Fiscal
Prudence.
Financial Implications: This report contains information pertaining to the financial status of
the Building Permit Stabilization Reserve Fund as at December 31, 2023.
Discussion: The purpose of this report is to fulfill Section 7(4) of the Building Code Act (the
“Act”) which requires the City to prepare an annual report of building permit and inspection
fees and related administrative and enforcement costs
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 volumes during a downturn
FIN 16-24 September 3, 2024
Subject: 2023 Building Permit Stabilization Reserve Fund Page 2
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.
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, 2022, was $2.01 million. Due to an excess of
building permit revenues over costs in 2023, the accumulated shortfall can be reduced by the
excess of revenues in the amount of $2.60 million, thereby eliminating the Building Permit
Stabilization Reserve Fund’s accumulated deficit figure of $2.01 million. The Building Permit
Stabilization Reserve Fund now has a positive 2023 yearend balance of $585,657 which can
be used as a possible funding source for future Building Services operating budget costs in the
event of slower growth to offset lower building permit fee revenues.
Annual Report – Building Permit Fees
for the Year Ended December 31, 2023
Building Permit Revenue $6,175,838
Costs:
Direct Costs $ (3,059,984)
Indirect Costs (520,197)
Capital Costs (3,580,181)
Excess (Shortfall) Revenue Over Costs $2,595,657
Building Permit Stabilization Reserve Fund
Opening Balance, January 1, 2022 $ -
2023 Contribution 2,595,657
Transfer to the Rate Stabilization Reserve (2,010,000)
Closing Balance, December 31, 2023 $ 585,657
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, 2022, the accumulated financial subsidy
or deficit was $2.01 million. From a financial perspective, this subsidy was funded from the
FIN 16-24 September 3, 2024
Subject: 2023 Building Permit Stabilization Reserve Fund Page 3
Rate Stabilization Reserve. The City’s financing strategy was to reduce this deficit (subsidy)
over time by transferring the Building Services operating surpluses to the Rate Stabilization
Reserve. In 2023, Building Services had an operating surplus of $2,595,657 of which 2.01
million was transferred from the Building Permit Stabilization Reserve Fund to the Rate
Stabilization Reserve, which eliminated the Building Permit Stabilization Reserve Fund’s
accumulated deficit.
Attachment: None.
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