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Hoover City Council raises building permit fees over builders' objections

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Photo by Jon Anderson

Building a home or new business in Hoover just got more expensive.

The Hoover City Council tonight voted 5-2 to increase building permit fees from $6 per $1,000 worth of value in construction to $8.50 per $1,000 worth of value. The increase amounts to $750 on a $300,000 house.

The percentage fee is in addition to the $1,500 base fee required for each new home in Hoover, which the city forwards to the Hoover Board of Education.

City Administrator Allan Rice said Hoover’s percentage-based building permit fees have not been adjusted since 1990. The increase will help bring Hoover’s fees more in line with nearby municipalities and help the city get caught up with the times as the cost of providing services has risen, Rice said.

Hoover’s fee was raised to $5 per $1,000 worth of construction in 1987 and $6 per $1,000 of construction in 1990, Councilman Curt Posey said.

Meanwhile, in the last several years, Birmingham and Vestavia Hills raised their fees to $9 per $1,000 worth of construction, and Jefferson County went to $9.50 per $1,000 of construction, said Jim Wyatt, Hoover’s director of building inspections.

The Greater Birmingham Association of Home Builders wrote a letter opposing Hoover’s increase, saying it is unaware of any study showing a correlation between the fee increase and the actual cost of providing services.

Councilmen John Lyda and Mike Shaw voted against the fee increase.

Fee or a tax?

Lyda said it’s really a tax instead of a fee and is the first tax increase presented to the Hoover City Council in decades. He called it “a watershed moment.”

Lyda said because the increase is percentage-based, it’s really a self-adjusting tax. As the value of homes has increased, the charge for building inspections has increased proportionally, so it doesn’t need to be increased again, he said.

Shaw said it is indeed a fee for a service that is provided instead of a tax, but he also didn’t see the logic in raising it unless the city could show a corresponding increase in the cost to inspect houses. “I don’t want it to be just a revenue grab,” Shaw said.

Lyda said while this increase doesn’t make Hoover the most expensive place to build in the metro area, it puts Hoover near the top.

Rice told the council at its work session last week that Hoover’s fees have not risen at the same rate as others in the Birmingham market and said it’s not realistic to try to provide a 2018 level of services at prices that are more than a decade old.

A representative for the Greater Birmingham Association of Home Builders last week cited statistics from a national study that talked about the benefits of home building for a community.

One hundred new single-family homes generate $28 million in local income, $3.5 million in taxes and 394 local jobs, the representative said. Increasing building permit fees is essentially taxing the builders, which will slow down the rate of construction and directly impact revenues, he said.

Councilman Casey Middlebrooks said he doesn’t think this amount of increase is going to slow down home building in Hoover. Posey said builders will simply pass the increase along to the homeowners, and an increase of this size is not going to greatly impact the cost on a mortgage.

Hoover’s chief financial officer, Melinda Lopez, said the revenues collected by the building inspections department actually don’t cover the costs of the services provided by the department. Once the $1,500-per-home base fee is sent to the school system, the department’s expenses are about $300,000 to $400,000 more than the revenue remaining, Lopez said.

The council also tonight changed the city’s building permit regulations to coincide with nationally-accepted standards regarding the cost of construction.

Up til now, builders have been able to tell the city how much it costs them to build a structure and their fee has been based on that estimate, but the city had no mechanism for making sure the builder’s estimate was correct, Wyatt said. Some builders have said recently they could build a home for $75 per square foot, but that’s way below the average cost these days of $116 per square foot, he said.

The changes approved tonight give the city a uniform way to figure builders’ costs, which should help keep the city from getting shorted on revenue, Wyatt said.

The new building permit regulations and fees go into effect immediately.

Other business

In other business tonight, the Hoover City Council:

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