Along the Coast: Building fees growth reflects local rebound

By Rich Pollack

Drive along State Road A1A and you’ll see the subtle signs of a steadily recovering economy.

In Manalapan, several older homes have been bulldozed to make way for new and larger luxury homes that are rising out of the ground. 

A short distance away crews are remodeling an aging condo for new owners who want a place with a more contemporary appearance.  Not far down the road in Highland Beach, a multimillion-dollar luxury condominium project is being built on what had been one of the last remaining empty parcels of land in town.  

All up and down the coast, South Florida’s economic rebound can be seen in the construction that’s taking place — and in the resulting revenues municipalities collect from building-permit fees.

“As the economy gets better, construction increases,” says Mike Desorcy, Highland Beach’s building official.  “When people are doing well, they spend more money.” 

In Manalapan, for example, construction of seven sizable single-family homes — four east of State Road A1A — during the last year has helped to generate close to $1 million in building fee revenues through the end of August. That’s a 170 percent increase of about $632,000 from the previous year when about $365,000 was collected from building fees. 

“This is the highest it’s been since I started here 13 years ago,” said Town Clerk Lisa Petersen.

One reason for the dramatic increase in Manalapan could be a pent-up demand for luxury homes as a result of the improving economy. 

“These are nice homes and quality homes,” Petersen said. “They’re being made with the highest quality materials and finishes available today.” 

Several miles south in Highland Beach, revenues from building fees for the first 11 months of this 2014-2015 fiscal year were close to $710,000. That is about $207,500 more than in the previous fiscal year and about $460,000 more than was collected from building fees in the 2009-2010 fiscal year. 

Much of this year’s increase can be attributed to a single project — construction of a 20-unit luxury condominium building at 3200 S. Ocean Blvd. Town officials estimate building-permit fees from that one project alone to be in the $200,000 range and say that figure could increase. 

In Highland Beach — and most other towns — building permit fees are usually set by ordinance or resolution and often are based on the construction value of a project. Highland Beach, for example, charges $15 per thousand dollars of improvement value up to the first $500,000 of value and $12 per thousand dollars of value for anything over $500,000. Fees vary in each municipality.

In Gulf Stream, a multifamily building project helped generate about $387,000 in building fee revenues last fiscal year, about $110,000 more than was collected through the end of August this year. That’s still significantly more than the $171,000 that was collected from building fees during the 2009-2010 fiscal year in the midst of the recession.

While new construction of multifamily buildings tends to bring in the largest chunk of revenue from building fees, town officials in coastal communities also are seeing building-permit-fee revenue increases coming from other, less obvious sources.

In addition to new home construction, remodeling projects and concrete restoration projects are helping to generate more building fee revenues. 

“People are doing more remodeling and they’re doing more extensive remodeling,” says Karen Hancsak, Ocean Ridge’s town clerk. 

So far this fiscal year, Ocean Ridge has issued 647 building permits. That’s down slightly from the last fiscal year when 706 permits were issued. It’s significantly up from five years ago, however, when only 519 building permits were issued. 

While there are fewer permits issued so far this year, compared to all of last year, the actual dollars collected are up, with Ocean Ridge receiving $250,000 in building-permit-fee revenue so far this year versus just under $230,000 last year. In 2009, during the height of the recession, the town collected only about $145,000 from building fees. 

This fiscal year, Ocean Ridge collected about $75,000 in building-permit fees from construction of five new houses, four of which replaced tear-downs. Permit fees from several remodeling projects totaled about $56,000, while an assortment of other building projects accounted for the remainder. 

Remodeling also accounts for a substantial amount of building permit fee revenue in South Palm Beach and Highland Beach, which both have a large number of condominium buildings. 

In South Palm Beach, which has 25 condominium buildings, 15 town homes and four single-family homes, a little less than one quarter of the town’s 464 building permits so far this fiscal year were for bathroom, kitchen or other remodeling projects. 

Highland Beach’s Desorcy says he is seeing an increasing number of condominium apartments purchased decades ago being passed on to children of the original owners, who either sell the units or move in themselves and quickly remodel. 

“The new owners often want it updated,” he said. 

Concrete restoration projects to aging condominiums, in which crews have to replace balconies and make other external repairs, can also increase building-fee revenues collected by towns. 

“Some of those restoration projects are million-dollar projects,” Desorcy said. “They can go on for years.”  

While the revenue generated by building permit fees in the small coastal towns — which have little if any commercial construction — is welcome, it pales in comparison to larger neighboring communities.

Delray Beach, for example, has generated close to $5 million in building permit fees through the first 11 months of this year, up from about $4.3 million last year.  

And in Boca Raton, where large projects are springing up in the downtown area, building permit fees have increased $2.25 million from last year’s $10.7 million in just the first 10 months of this year. 

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