Builder Permit Fee Increases Delayed as Stakeholders Push Back on Development Services Department Inefficiencies
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Dallas Development Services is looking to increase the builder permit fee in an effort to recoup a $22 million departmental deficit.
The department collects about $28 million in revenue each year, but has an operating cost of about $50 million, Development Services Director Andrew Espinoza told the Dallas City Council’s Economic Development Committee on Dec. 4. The City Council was expected to approve proposed increases this week and implement the new fee schedule by February.
District 13 Councilwoman Gay Donnell Willis pulled the proposed builder permit fee increase ordinance from Wednesday’s agenda and asked that a vote be delayed to Jan. 24. She said she wanted stakeholders to have an ample opportunity to provide feedback, but if they oppose the increases, she wants to hear a compelling reason.
District 1 Councilman Chad West and other elected officials supported the deferral.
“I do believe that the city should work toward full cost recovery for expended taxpayer resources, but it’s equally essential for the city to be as efficient as possible, finding cost savings through automation and efficiencies,” West wrote in an email to CandysDirt.com. “The discussion on efficiencies and automation, including the use of artificial intelligence, will continue in the Government Performance and Financial Management committee.”
Development Services Vows to Do Better
The Development Services Department operates as an enterprise fund and has been making up its deficit through reserves, Espinoza said.
“If we cannot cover our costs, we have to cut staff,” he said.
DSD committed this year to improving customer service, reducing permitting turnaround times, and improving efficiency following a backlog since the COVID-19 pandemic that frustrated local builders and cost the city tax revenue and new development opportunities.
Dallas has not updated its permitting fees since 2015. MGT Consulting of America completed a fee study in October that reviewed costs associated with building inspections, engineering, GIS, and subdivision teams, Espinoza said.
“Currently the department provides 40 services that are not codified so we’re not able to charge a fee,” he said.
Espinoza clarified that they are not proposing builder impact fees.
In addition to increasing permitting fees, consultants are recommending a $15 technology fee to be added across the board to each permit, a common practice among other municipalities.
David Lehde, Dallas Builders Association director of government affairs, told CandysDirt.com that cities shouldn’t base their fees on what other municipalities do.
“They should be basing them on what is effective for their own city,” he said. “Their fees should be based on their cost analysis for their service. No application packet is identical from city to city. Are they considering the total impact on housing? I know they’re considering how they pay the bills, but if they drive these fees up so much that people decide they can’t afford to live in Dallas, they’re going to have a lot more problems paying salaries for staff when there are fewer permits coming through the door as a result. Nobody wants to see that happen.”
Other stakeholders, including The Real Estate Council, expressed concerns about the fee study and permitting fee increases, outlined in a memorandum filed by city staff Dec. 8.
Builders Respond to Proposed Builder Permit Fee Increase
Lehde said his understanding is that the department currently has a surplus in its budget but could be operating in the red by 2025 if it continues functioning as-is.
“Our concern is the assumptions made in [the fee] study,” Lehde said. “We weren’t really presented with the actual study. We were shown slides early on that this was coming and they were talking about it. When the actual study came out, it was after those meetings. We never got to sit down with the consultant about the assumptions made. They were concerned about the lack of fees but our concern is, how is the lack of efficiency driving up the cost of these fees?”
There’s a cost to the department when a builder has to resubmit plans, Lehde explained.
“How much is that playing into it?” he said. “They were looking for a new office building. Did the purchase of that or any funds for that come out of the enterprise fund? Are they concerned how inefficiencies have driven up their costs?”
Some of the fee increases are significant, he said, and could translate to potentially thousands added to the cost of building a new home.
“This is on top of new sewer tap fees, that we were told of after the fact, that are increasing somewhere around $2,000,” Lehde said. “We think they need to have the consultant do a presentation on the study itself, not slides about the study, where we can ask questions and provide feedback.”
At the Dec. 4 Economic Development Committee meeting, Mayor Pro Tem Tennell Atkins emphasized the necessity of taking swift action on builder permit fees.
“What we’re doing is … we did not raise our fees for many, many years,” he said. “Because we did not raise our fees, it’s costing us right now. If we do not raise our fees, we’re going to have to cut staff. If we cut staff, it means permits are going to be in a worse condition than they ever were before.”
District 14 Councilman Paul Ridley said the cash hemorrhaging in the Development Services Department needs to stop.
“That also means that we have been subsidizing private industry for several years by below-cost rates for permits,” he said. “Therefore, they are in a weak position, I think, historically, to claim that these increases that are being proposed are excessive when they have been receiving essentially a subsidy for many years. You have responded to the principal concern by reducing the time turnaround, and I think [builders] should be willing to pay the cost of doing that.”
