Local officials have delayed a vote that would increase Dallas’ building permit fees by over $22 million following pushback from the development community.
Dallas’ Development Services Department (DSD) — the agency responsible for reviewing and approving building permits — is seeking to increase its service fees by roughly $22.2 million to close the cost-recovery gap created by undercharging developers to build in the city.
As reported by The Dallas Express, DSD has $50 million in operational user costs per year but only collects about $28 million in service fees. Consequently, DSD loses out on about $22 million each year by purportedly undercharging customers for its services.
The main issue for DSD is that the department is supported solely by the permit fees it collects from customers, and those fees have not been adjusted since 2015, according to DSD’s recent fee study. Therefore, until Dallas City Council members vote to consolidate and codify the new permit fees in Chapter 52 of the Dallas Development Code, DSD will be unable to recoup the full cost of its services.
As a result of pushback from the development community, council members agreed on Wednesday to delay their vote until March in order to give the stakeholders more time to meet with DSD about the fee adjustments.
The two organizations with outstanding concerns regarding DSD’s fee increase include The Real Estate Council (TREC) and the Dallas Builders Association (DBA).
TREC’s three main concerns stem from DSD’s implementation timeline, its justification for the fee increase, and the unintended consequences that builders would face.
While it is allegedly crucial that DSD recover the full cost of its services, the department has not provided stakeholders sufficient clarity concerning its decision to do so, according to Travis Reynolds, public policy and programs manager for TREC.
“DSD aspires to operate like a business, but no business would ever change its fee structure three times in a six-week period,” said Reynolds during Wednesday’s council meeting. “This approach is inevitably going to cause confusion among staff and customers.”
For instance, Reynolds said one of TREC’s major concerns was that developers with small, mid-size, and even large projects may pause their plans given the current market pressure and the impact a large fee increase might cause. Fewer single-family, multifamily, and commercial projects could be built in Dallas if it becomes too expensive for developers to build in the city.
According to Reynolds, a “phased fee implementation” would be the best strategy for stakeholders, considering large and small developers could budget for the higher permitting costs and forecast any future fee increases and expenditures.
TREC has asked council members to approve a portion of the fees on April 1 and the remaining fees on January 1, 2025.
Meanwhile, some of DBA’s concerns involve the roughly 200% proposed increase in the cost of multifamily permits.
“We see that to be more than $100 higher per unit than we see in other areas of the region that our builders typically build in,” DBA director of government affairs David Lehde said during the meeting.
The problem is that multifamily developers have a lot to deal with, including “affordability issues,” parking and transportation, and other “initiatives that are put on them by the City,” said Lehde.
DBA also has concerns about the residential plan review, especially how it applies to single-family projects.
Lehde said DBA members are paying between $80 to $150 in existing fees for residential plan reviews in other cities around the region. However, that is expected to jump to between $550 and $570 in Dallas after the fee update.
While Council Member Paul Ridley (District 14) said he wants DSD to start recouping its costs as soon as possible, City Manager T.C. Broadnax and Mayor Pro Tem Tennell Atkins (District 8) said they believe the delay will give officials time to hammer out the details with stakeholders.
“I think the conversation around the acceptability of the fee has obviously been tempered a little bit,” Broadnax said during the meeting.
“The updated fees simply reflect the math of not adjusting the fees in nine years,” Broadnax said, noting how service costs have increased significantly over that period, particularly during the last two years.
He explained that from a “studies practicality standpoint,” it comes down to how much all the staff costs, what fees can be charged, how many hours staff work, which staff are doing the work, and what their cost is per hour. Multiply that by the number of permit applications coming through DSD’s door in any given year, and you get the new fees needed to recover the full cost of services, he explained.
As previously reported by The Dallas Express, DSD has been plagued by various inefficiencies and periodic permitting backlogs under Broadnax.
Despite some confusion around when the fees should be implemented, Assistant City Manager Majed Al-Ghafry said pushing the decision to April was a “reasonable” request.
“Starting in April would not be completely detrimental,” said Al-Ghafry during the meeting.
Ultimately, the council members agreed to defer the item until March 27, 2024.
