Staff recommends approval of the proposed resolution to adjust Building, Mechanical, Plumbing, Electrical, and Fire System permit fees.

The proposed resolution will repeal Resolution 11-19068, which set the permit fee rates currently being used. The new resolution simplifies the fee schedules and will generally reduce overall permit and plan review fees by about 23-31%. Some adjustments result in nominal increases to flat fees, while plan revision and deferred submittal fees will be eliminated. Commercial plan review fees will be reduced from 65% to 60% of the permit cost. There is no plan review fee for residential projects. The new resolution intends to reduce, simplify, and streamline the Building Division fees.

Building permit fees for both commercial and residential building projects are a function of the project valuation. The project valuations are determined either by the cost provided by the applicant or calculated by the plans examiner based on estimated building costs published semi-annually by the International Code Council, which takes into account the type of construction and use of the building. Due to the significant increase in construction costs over the last few years, the revenues collected from permit and plan review fees have outpaced the Building Division's operating costs. While several of these projects are multi-year projects where the fees are collected up front, based on the continued projected construction growth, the fees need to be adjusted so that the revenues do not continue to significantly outpace the division's expenses. MCA 50-60-106 requires that Building Divisions do not hold more than 36 months' operating expenses in reserves. Currently, we are estimated to have about 22 months' operating expenses in reserves. The state allows up to 36 months primarily for smaller jurisdictions that may have inconsistent revenues, yet need to provide services for multi-year projects. All fees are collected up front before construction starts, so it is critical to budget those fees for the lifespan of the project. With the proposed fee reductions, we have taken into account the operating funds needed for the lifetime of projects currently in review and under construction. Our intent is to draw down reserves over the next couple of years and the resolution may need to be replaced with a new resolution to stabilize fees once reserves have been adequately reduced. Our goal is to hold no more than a 10-12 month reserve, while taking into account continual operating expenses needed for projects under review or construction.

Based on current construction trends, the proposed resolution should reduce the Building Division's FY27 revenues by around $750,000 - $1,000,000. Overall, our customers will see a reduction in permit fees of 23-31%.

Alternatives include:
- Keep the resolution as-is with current fees
- Reduce fees by a different amount