City Fees

Building Permit Fees, Impact Fees, Plan Check Fees?

I have noticed a bit of confusion when the conversation talks about “building permit fees”.  Maybe because of my land acquisition background, I have always tried to ask multiple times and clarify what are permit fees and what are impact fees. It is more of a lengthy land acquisition discussion, but the importance has to do with land transactions and land related costs.

First, let’s talk about plan check or processing fees.  Typically, when you submit grading plans, improvement plans, or building plans to a City for review and obtaining permits, the City will require fees to be paid for the review and processing.  In most cases, these plan check fees are really a deposit so that City employees can charge their time that they spend reviewing your plans.  And the City typically has a schedule of plan check fees that is specific to what you are submitting.

So now let’s talk about “building permit” fees.  Once your building plans are approved, you typically need to pay a fee for each building permit that is issued.  And I like to think of this fee as an inspection fee.  During the course of construction, you will be required to obtain City inspections of your foundations, framing, electrical, plumbing, and a few other key trades.  The building permit fee is essentially funding the City inspectors who come out to your project.

So now comes the bit of confusion.  The City and other public agencies have been charging “impact fees”, which is meant to say that your new project has an impact on existing infrastructure and you need to pay these fees to compensate for your project’s stress on the existing infrastructure.  Thus, you may need to pay sewer and water connection fees, school facility fees, traffic fees, bridge fees, and possibly many more.  Many of these fees are paid when pulling building permits, and therefore have sometimes been also referred to as building permit fees.

Why is this important?  It mostly has to do with land transaction negotiations, as impact fees are typically thought of as land costs because they are more specific to a location than the plan check or inspection fees.  I have seen some impact fees total as low as $10,000 per home, or as high as $115,000 per home.  It is a longer discussion on this topic, but I know that most land deals have a specific discussion on impact fees.

To summarize, I like to think of these City fees being 1) plan check or process fees, 2) building permit or inspection fees, and 3) impact fees that have a bigger relationship to the land deal.

As always, feel free to share your thoughts, comments, or questions below.

John Kaye has over 30 years experience within the land development and homebuilding industries, having held senior management positions with The Irvine Company, Koll Real Estate Group, and Brookfield Homes. As a developer, John has overseen the land acquisition, entitlements, and development of master planned communities, residential tracts, urban infill sites, and land assemblages. His experience and skill sets include land acquisition, land brokerage, project management, market analysis, finance, and strategic planning.

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