Ask the Lawyer: About Permit Fee Increases
Q: I’m a single-family home builder and my local government recently increased the building permit fees 200%. I discovered the fee increase when I submitted my paperwork for a new building permit. As far as I am aware, my local building department imposed this fee increase without notifying anyone in advance of the increase. Can they do that?
A: The regulatory fees that local governments charge builders for permits, inspections licenses and other basic development review services are escalating with increasing frequency to levels not justified by the level of services being provided. Generally, by law, local governments must set fees that are fair, reasonable and commensurate to the services being provided.
While many states have enabling language that authorizes local governments to assess regulatory fee schedules to defray the costs they incur in performing their regulatory duties (e.g. licensing, inspections, plan review), it seems that this authority is being abused nationwide.
In a fairly standard scenario, a municipality, either by ordinance or a less formal administrative procedure, doubles or even triples an existing building permit fee, that their builders must pay before they begin construction. Most often, the municipality has done little or nothing to improve its level of services associated with the fee, such as hiring additional permit review staff or otherwise expediting the permit approval process.
Further compounding its potential abuse of authority, the municipality, in assessing these “regulatory fees,” merges the revenues generated by the fees with its general operating fund. What the municipality holds out as a legitimate regulatory fee is effectively a masquerade for an illegal tax.
As a rule, local governments lack inherent taxing authority and must justify these “taxes” with the backing of express statutory authority. To determine whether a particular charge is a "tax" or a "fee", if the charge is for general revenue raising purposes, then it is a tax. If it is used for purely regulatory purposes or services, that makes it a fee.
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"Ask the Lawyer" is a service of the NAHB Legal Action Committee and NAHB Building Products Issues Committee. The information provided is intended to familiarize you with the law in this area. It is not intended to be an exhaustive presentation of legal information on this particular subject, and in no way constitutes an opinion of law. Your own attorney must review this information to determine how it may apply to your particular situation.