Development Fees – Educate so you can Navigate before it’s Too Late!

Development Fees. Permit Fees. Impact Fees… It has happened even to the most experienced developers. Financing secure, Architectural plans almost complete, Civil plans in permitting, groundbreaking set. Then a bill comes in from the City, or Water Company, or third party plan reviewer. You’ve accounted for some miscellaneous “Permit” fees, but this is five times your budget!

When the fees add up, they can be anywhere from $10,000. To $500,000 or more. And if you’re already in process, that may destroy your pro-forma (now your investor’s ROI) before you even get started.

Because every AHJ (Authority Having Jurisdiction) is different and may have different names, it’s tough to even know what to ask to avoid this situation.  Please keep in mind – just because someone might work for the Planning department of a municipality does NOT mean that they know what the fees might be for the Engineering department or the County Stormwater review. Make sure your due diligence is done before you fill in that line on your pro-forma.

Take a look through the below segments: General Definitions and Hints, Application Fees, Review Fees, Impact Fees and Permit Fees.

I. General Definitions and Hints

Keep in mind that some municipalities are also the utility provider and will lump a lot of these together – or call them something slightly different. AND – not every municipality or utility provider will have every fee.

Municipal Fees:

  • Submittal/Permit/Application/Review Fees: Paid to the City or a third party reviewer. Can include an initial upfront amount AND then a fee at completion of review for the balance. There may be several of these for one project (one for planning/zoning, one for building, one for drainage, etc.)
  • Administrative Fees: Usually for preparing public hearing information, recording, or simply for processing information or maintaining data.
  • Impact Fees: Can be for Roadway (usually based on frontage), Parks, General Infrastructure, or other items. These can add up to a LOT of money quickly.

Utility Fees:

  • Submittal/Permit/Review Fees: Paid to the Provider or a third party reviewer for administrative handling and technical review. Usually an initial fee and then by the hour for the review.
  • Impact Fees: A fee based on how much of the utility you’ll be using. Sometimes called a ‘System Fee’ or similar. These can add up to a LOT of money quickly.
  • Connection/Tap Fees: These can range from a simple fee to connect to the system to being required to pay for the provider to actually do the connection for you.

II. Application Fees

These fees are associated with submitting applications to Planning/Engineering/Building.  They typically include:

Planning Department (typically):

  • Improvement Location Permit Application
  • Development Plan Applications
  • Subdivision Platting Application
  • Variance Application
  • Rezoning Application

Engineering/Building Department (typically):

  • Land Disturbance/Grading Application
  • Drainage/Detention/Outfall Application

Just the submittal of these forms can run anywhere from thirty bucks to multiple thousands of dollars depending on the Authority Having Jurisdiction and project details. Depending on your Civil Engineering Consultant or Project Team, these fees may be handled by them, but keep in mind they are NOT part of their professional responsibility and the Owner will reimburse for them (and usually with some additional cost).

III. Review Fees

As the review moves forward, plans and reports may be reviewed by the in-house staff or are sometimes sent to outside consultants. The cost of this effort is generally charged on an hourly rate (hopefully) disclosed as part of the permit application.

IMPORTANT: NO ONE CAN TELL YOU THE EXACT AMOUNT OF THESE COSTS BEFORE THE ACTUAL REVIEW IS COMPLETE!! I know you need a final number to put into your proforma. Your bank counts on it. Your investors count on it. It just cannot happen. Ask for a typical from the municipality and then double it.

These fees are typically paid when the permit is acquired.  Depending on the size of the project and the municipality, we could again be talking from the low hundreds of dollars to several thousand.

IV. Impact Fees

While fourth on our list here, these are potentially your biggest dollar impact. Impact fees can be costly and are also referred to as tap fees, system fees, even parks and recreation fees. They are related specifically to the new burden that your project will put on the existing systems. Impact fees can be assessed on roads, water, sewer, gas, driveways, and parks facilities, even school systems on occasion.

The amount for these can range from a simple calculation based on linear feet of roadway frontage to computing an EXACT number of plumbing fixtures inside the building and converting that to gallons per day of water or sewer usage. The larger the impact, the larger the fee. A multi-family complex uses a lot of water, sewer, electricity, and creates a lot of traffic. Impact fees could add up quickly on such projects to hundreds of thousands of dollars – or even more.

Be prepared. Ask all of the questions you can. Confirm those answers later in writing. Count on your consultant, but don’t rely solely on them – make sure you are asking for yourself.

These fees are generally required prior to beginning construction, but depending on utility or municipality can be delayed to just before the Certificate of Occupancy is granted.

V. Finally… Permit Fees!

Some of these may have been taken care of within the fees above depending on jurisdiction, but there is nearly always a separate building permit fee – potentially inclusive of architectural review, trades submittals and reviews, and even other permits from another Authority Having Jusrisdiction. Some of these ‘surprise’ fees may include:

  • State Department of Transportation Permits – for drainage or driveway/roadway modifications required for a project on their right of way.
  • Erosion Control Review – some jurisdictions require a separate review specifically for soil erosion control.
  • ADA Review – some jurisdictions require a separate review specifically to check your grading an building designs for compliance with the ADA.
  • Notice of Intent – Any project disturbing more than 1-acre will require this be submitted to the State, usually after publishing notice in the paper and with a small check.

A Final Note:

The post above is only for educational purposes and not meant to be an all-encompassing list of possible fees. In this day where municipalities are trying to recover and protect revenue as much as possible, I’m certain that a new kind of fee has been thought of by someone just in the time that it took to read this!

The best course is to educate yourself as much as possible and call a good experienced consultant to help you through!

 

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