June 19, 2013 - Construction in Oxford Township will get more expensive as of Jan. 1, 2014 when a dramatic increase in the municipality's building fees takes effect.
Last week, the township board voted 5-2 to increase the building department's fee schedule in order to make it self-sustaining and end the practice of having to subsidize the department with taxpayer money from the general fund budget.
The current fees, which have been in effect since May 2005, do not cover the cost of operating the department, according to officials.
"If a builder comes in (and) wants to build something, (paying fees is) the cost of doing business," said township Treasurer Joe Ferrari. "Why is it up to government to subsidize building? It's not."
Under the new fee schedule, which is shown on Page 10, a 1,000-square-foot residential addition or remodel with a construction value of $75,000 will increase from the current $525 in fees for building, plumbing, mechanical and electrical permits to a total of $1,482.75, which includes permits plus plan review fees.
Township officials included in their resolution language stating that all fees will be rounded to the "lower dollar," so it would actually be $1,482.
The fees for building a 2,500-square-foot house with a construction value of $230,000 will nearly double. The cost will go from $1,180 to $2,240.
But it's commercial projects that will experience the largest increase.
For example, an 18,000-square-foot commercial project with a construction value of $4.5 million will experience a $20,462 increase, from the current $4,200 to a new total of $24,662.
It should be noted that in the aforementioned examples, which were calculated by township Planner Brian Oppmann and presented at the meeting, the current charges did not include plan review fees.
Right now, the township charges applicants $100 to review plans for new homes. For commercial projects, the charge is based on square footage. Commercial charges range from $100 for projects up to 5,000 square feet to $300 for projects of 20,001 square feet or more.
One hundred percent of the plan review fees currently go directly to the inspector, however, Oppmann noted the township is planning to renegotiate that along with how its inspectors are paid for their work.
Oppmann originally proposed gradually increasing the building fees over a three-year period beginning this year.
However, the township board ultimately decided to do it all at once and implement the proposed 2015 fee schedule (shown right) beginning Jan. 1, 2014.
Trustee Jack Curtis wanted to give developers and builders plenty of notice about the new fees and time to adjust.
"We need to make our community aware of it before we do it," he said.
It was the new schedule's significant increase in fees for commercial building projects that didn't set well with some township trustees.
"That seems like it's horrendous," said Trustee Melvin (Buck) Cryderman, referring to the $20,462 increase cited in Oppmann's example.
Trustee Sue Bellairs agreed
"I think (the fee) needs to be raised. I think they all need to be raised," she said. "But I think that's just too big of a jump at this time . . . Too quick. Too big. Too fast."
However, Oppmann, an associate with the Ann Arbor-based Carlisle Wortman Associates, Inc., said that "it's actually low."
"Other communities that we represent in northern Oakland County charge a lot more than that," he said.
Oppmann explained that unlike plans for a new deck or even an entire home, reviewing plans for commercial and industrial projects is a very time-consuming process.
"A commercial/industrial project takes many hours and usually there's back-and-forth with the architect or the designer or whoever prepared the plans," he said. "There's a lot more involved. There's a lot of inspections involved. Commercial projects require a whole level of complexity that is not there (with) a single family home."
In examining the building fees in other communities for an 18,000-square-foot commercial project valued at $4.5 million, Oppmann determined such a project would be charged $37,122 in fees by Waterford Township and $33,865 by the City of Milan.
Since about 2008, the township's general fund has been subsidizing the building department by paying 100 percent of the wages for Supervisor Bill Dunn and Deputy Supervisor Deanna Cushing, who have been staffing the department.
Dunn and Cushing stepped in after the building department's administrative assistant left in January 2008 and the building official retired in October 2007.
The economic downturn significantly slowed activity at the building department for a number of years, so it was decided that Dunn and Cushing would continue to staff it rather than hire new people and pay them out of the building department budget.
"They ran the whole department," Ferrari said.
Because Dunn and Cushing were being paid out of the general fund, this allowed the building department to build up its fund balance to the current amount of $129,000.
"It took us six years to take it from almost zero to $129,000," Dunn told this reporter.
It's essential the building department remain solvent so the township can retain control of it. "If you run in a deficit, the state can come in and take over your department," Oppmann told the board.
But it wasn't just the economic downturn that negatively impacted the building department. The insufficient fee structure had already been eating into the fund balance.
At one point, the department's fund balance was almost zero. "It was going down, down, down," Dunn told this reporter.
That's why township officials cut the administrative assistant position from full to part-time in July 2005. That's why the building official was changed from a full-time employee to a contract position in August 2007. That's why inspectors went from receiving 75 percent of permit fees to 50 percent.
Activity in the building department is picking up again as evidenced by the 45 new housing starts this year. The township recently hired a full-time administrative assistant for $32,393 per year to work for the building department and handle planning/zoning issues as well.
But Oppmann told the board "even though building is up" and "things continue to improve at the township financially," the general fund "shouldn't be supporting the building department."
He said building fees must be increased in order for the department to cover its own expenses, which include administrative costs.
"You have an administrative staff (that) has to prepare the plans for (the building inspector and) set up the permit, which is (written) by hand," Oppmann said. "There's time involved to process the permit and that is what's not being accounted for at the township at this point. That's why there's an adjustment in fees."
Oppmann noted there are other costs to consider in running the building department such as training, computer software and renting its office space from the township.
Officials agreed they didn't like the idea of the tax-supported general fund continuing to subsidize the building department.
"It's not right that the general fund picks up the building department slack," Dunn said.
"I agree that the building department should be self-funded," said Curtis said. "I don't want to pay (taxes) for somebody else to build their house."
Oxford Village Manager Joe Young cautioned the township board about approving these new fees because when Oppmann did his comparison to other communities, it didn't include surrounding municipalities like Orion Township or even the village.
"You're competing with these other communities," he said. "It would be good to know where you stand relative to them."
In Oppmann's analysis, the township's building fees were compared to Springfield, White Lake and Waterford townships, the City of Milan and the State of Michigan.
"We could have listed 20 different communities on there," he told the board. "Sometimes that helps. Sometimes it doesn't help."
Oppmann explained to this reporter that White Lake and Waterford were selected because they're "very similar" to Oxford Township when it comes to the "overall complexity of (construction) projects and land uses." He noted that just as Oxford has its M-24 corridor, White Lake has M-59 running through it.
Oppmann told this reporter Orion Township wasn't used in the comparison because it's in the middle of reviewing its fees.
At the meeting, Dunn told Young that Orion officials "haven't upgraded (their fee schedule) in over 10 years" and when Orion's building official saw what Oppmann proposed, he "grabbed" it and "ran back to Orion to change his."
As for why the village wasn't used in the comparison, Oppmann told this reporter, it deals with "totally different" building projects than the township. He said most of the village's construction involves renovations, remodeling jobs and rehabilitating buildings.
Based on his review of the new fee schedule, Young warned the township board that building departments are, by law, not supposed to earn a profit on inspections because they're about "safety" and "building to code."
Again, Oppmann noted the building department has more expenses than just paying inspectors.
He cited the costs for administration, computer software, training and rent.
Dunn said if the township runs into a situation somewhere down the line in which the building department is profiting, the board can adjust the fees accordingly.
CJ Carnacchio is editor for The Oxford Leader. He lives in the Village of Oxford with his wife Connie and daughter Larissa. When he's not busy working on the newspaper, he enjoys cigars/pipes, Martinis/Scotch, hunting and fishing.