A string of new building permit fees could be coming down the line for developers in Dallas.
Dallas’ Development Services Department (DSD) is proposing new division-specific service fees as a means to unburden taxpayers from subsidizing the local building permit process, according to a presentation given by DSD during an Economic Development Committee Meeting on Monday.
Per the findings from DSD’s recent fee study, which was conducted by MGT Consultants, the department generates approximately $28 million in revenue but has roughly $50 million in operational user costs based on its 2023-2024 fiscal year budget.
Through its Development Enterprise Fund (DEF), the City of Dallas is subsidizing $22.3 million in development costs that go unrecovered by the department under City Manager T.C. Broadnax, as previously reported by The Dallas Express.
At its current pace, DSD is on track to burn through its roughly $12-13 million in DEF reserves sometime in 2025, which will leave the department in the red to the tune of roughly $5 million, according to Assistant City Manager Majed Al-Ghafry.
To unburden Dallas taxpayers from subsidizing nearly half (45%) of DSD’s service costs, the department is proposing around 40 new process fees for the divisions currently not generating enough revenue.
The four divisions currently losing money include Inspection/Plan Review (-$17,396,535 or 42%), GIS (-763,950 or 97%), Engineering (-$3,554,818 or 61%), and Subdivision (-$602,466 or 32%).
According to DSD, the department relies on the significant subsidy because the City of Dallas does not charge utility impact fees as other cities do, and it has not adjusted its permit fees schedule since 2015.
Consequently, DSD has proposed several changes to its fee schedule that would purportedly yield a higher cost-recovery rate. Recommendations include adding and consolidating the full-cost recovery “Fee Schedule Updates” to Chapter 52 of the Dallas City Code and codifying the requirements for ongoing “Fee Study Schedules.”
If DSD can charge new service fees for each of the four divisions based strictly on permitting, plan review, and inspection services, the department could allegedly recover $27 million of additional revenues and achieve a 99.7% cost-recovery rate.
However, if the department does not start charging higher fees and does not achieve a higher cost-recovery rate in the near term, DSD Director Andrew Espinoza told the committee that the department would have to reduce headcount to balance out the losses.
“If we cannot cover our costs, we would have to cut staff,” Espinoza told the committee.
Raising alarm bells over the issue once again was Dallas Mayor Pro Tem and District 8 Council Member Tennell Atkins.
“Because we did not raise our fee for many, many years, it’s costing us right now,” said Atkins. “If we do not raise our fees, we will have to cut staff — and if we cut staff, that means permits are going to be in a worse condition than ever been before.”
Atkins’ sense of urgency was echoed by District 14 Council Member Paul Ridley, who said, “Time was of the essence.”
“We’re hemorrhaging cash every day to the tune of millions of dollars over the year. We need to adopt these fee increases to charge the real cost of our improved service to the developers who have been demanding that service,” Ridley said. “So, I encourage you to proceed expeditiously with your proposal.”
DSD’s next steps are to partner with the City Attorney’s office to draft an ordinance for the committee’s consideration. The ordinance update will be provided to the council on December 13. If approved, Espinoza said the department’s goal would be to implement the updated fees by February 1.