Auditor general finds deficiencies in administration of fees, valuation method used in processing permits
The City of Vancouver collected $29.2 million in building permit fees in 2022 — more than double the $12.3 million processed in 2021 from applicants requiring approvals for new construction, alterations or changes made to land use or occupancy on private property.
The statistics are included in a performance audit report released Wednesday by the City of Vancouver’s auditor general Mike Macdonell, whose team found deficiencies and discrepancies in how some permits were processed and fees determined.
The report said city staff did not provide detailed guidance to applicants to ensure that project cost estimates submitted in building permit applications were “complete, reasonable and supportable.”
The audit also found the city lacked written procedures and guidance for staff on the building permit fee assessment process, with discrepancies identified in valuation methods used to determine the cost of a project.
For example, the Marshall & Swift valuation method — a nationally recognized cost-estimation program used to determine the market value of a building — was not used by the city’s development, building and licensing department to validate cost estimates provided by applicants.
The Marshall & Swift method is specified in the city’s building bylaw.
“The use of cost estimates provided by applicants as the foundation for calculating fees has inherent limitations,” the report said. “Estimates can vary widely depending on the estimation method and assumptions used and may not be fully reflective of actual project costs due to the uncertain nature of the estimation process.”
‘Fair and consistent process’
Macdonell’s team reviewed one application that valued the proposed work at $30 million and found that the same project was valued at approximately $23 million using the Marshall & Swift method.
Using another industry comparator, the auditors determined the value at $48 million.
“It is important for the city to implement a fair and consistent process that results in the most efficient method of charging fees that reflect the city’s cost of providing building permit services,” said the report, which also pointed out that in some cases applicants were overcharged and others undercharged.
In one case, the auditors found the city could have collected an additional $27,394 in fees. In another case, the city should have collected $1,674 less in fees.
Building permit fees are charged to recover expenses incurred in processing permit applications. The $29.2 million collected in 2022 was connected to 1,457 building permits issued, which was an increase of 488 from 2021.
Macdonell’s team conducted the audit between January 2021 and June 2022. The focus was on the accuracy of building permit fees and associated administrative processes and practices.
Total fees collected during the audit period was $21,047,544 on an estimated value of construction at $3,815,602,866.
‘Major focus of our council’
The audit did not examine the time it takes for an applicant to be issued a permit — a topic that played out in last fall’s civic election campaign, with newly elected Mayor Ken Sim referring to the issue Tuesday in a speech to the Greater Vancouver Board of Trade.
“To be very clear, our biggest barrier on housing is connected to permit wait times and this will be a major focus of our council,” Sim told the crowd of more than 700 people, which included many developers.
Macdonell’s report contains five recommendations to improve the administration of building permit fees, including “redesigning processes to more explicitly comply with the building bylaw and address risks of under-charging and over-charging fees.”
In response to the audit and recommendations, the city’s communications department issued a statement Wednesday from Andrea Law, the city’s general manager of development, building and licensing.
Law said she accepted the five recommendations.
“The audit offered an opportunity to gain insights into departmental administration of the cost valuation program and to identify inconsistencies and opportunities for improvement,” Law said.
“City leadership also acknowledges the complexities of the current cost valuation tool recognized in the Vancouver building bylaw, which may have contributed to some of the inconsistencies identified, and will be exploring other acceptable industry tools that may offer a simplified cost valuation methodology.”