Builders lament planning fees

Long-awaited changes to development
and planning regulations including new fees are raising concern among building
companies.

The new fees were gazetted on 16
June, and an announcement was sent out this past Wednesday by the Planning
Department reminding builders of the changes that went into effect Monday.

Builders and contractors including
Rayal Bodden of Robson Construction, president of the Cayman Contractors
Association, said they were not aware of the new fees.

“We had no advance warning of this
increase. With only two working days notice it is not really enough time to
prepare an application even if currently in progress, although we may be working
late tonight,” said Wil Steward, managing director of Chalmers Gibb Architects.

Speaking to the Legislative
Assembly on 25 March, Premier McKeeva Bush explained how the Development and
Planning (Amendment) Regulations, 2010 would increase the fee charged to apply
for Planning permission building permits, provide for the operation of cash in
lieu, introduce new fees for services that were being provided for free and
increase the deterrent fee for illegal developments under the Development and
Planning Regulations (2006 Revision).

“It is not all about money; it is
also about enabling the department to function more efficiently and effectively
in the public interest,” Mr. Bush said at the time, noting that the last time
there were any significant changes to the fees was in 1997.

“These fee increases were agreed as
part of the overall revenue-enhancement package presented by the Government in
the 2009/10 Budget and this change in the regulations will put in place the
legislative instruments needed to bring the increase into effect,” Mr. Bush
said.

“It certainly does not cost us now
what it cost then to deliver those services, which are necessary for proper
planning controls to be exercised.”

Making up for lost time

Changes in planning application
fees include a change from 15 cents to 25 cents per square foot for the
construction of, or extension to a house and 40 cents for an apartment; a
change from 20 cents per square foot to 50 cents per square foot for a commercial
or industrial development and a change of 15 cents to 40 cents per square foot
for a hotel.

A new fee of $100 per acre for
clearing of land by mechanical means was also introduced.

In addition, each amendment or
deletion of condition for planning permission will also cost $100 per item.

The new regulations also set out an
administrative filing fee for anyone who withdraws their application to the
Central Planning Authority or the Development Control Board before the
application is heard.

A press release on the changes
issued Friday also notes that another amendment addresses the construction of
buildings or other structures that are started or even completed without
planning permission. “One of the problems with projects that are built without
planning permission is that they often violate some aspect of the regulations
or code,” it states.

“When an after-the-fact application
is made and the CPA requires a change, the owner then claims undue hardship,
creating a dilemma for planning regulators.”

In an effort to avert the strain on
planning resources and act as a deterrent to building without planning
permission, the after-the-fact application fee has been increased from two
times the regular fee to 10 times the regular fee. However, the new fee only
applies to buildings started after the amendment came in to effect.

Building permit fees will also
increase and are not insubstantial. For example, the building permit fee for a
house 2,500 square feet but not exceeding 4,000 square feet had been 25 cents
per square foot.

The new fee for a home up to 4,000
square feet is $1.50 per square foot.

Building permit fees for apartments
over 800 square feet had cost 75 cents per square foot, but now the building
permit cost is a flat $2.50 per square foot for apartments of any size.

A new fee for additional reviews of
building permits has also been introduced in an effort to encourage builders to
submit all the correct documentation the first time around.

Reaction

Despite the assurances that the
changes will introduce efficiencies, members of the development industry are
not convinced they will have a positive impact overall.

“I am not sure what advice was
sought prior to making this change in planning fees since it could be a
disincentive to encouraging new development. The net effect obviously remains
to be seen. However, we are certain of one thing – it will not be a stimulus to
new building,” said Mr. Steward.

“The cost to a developer will vary
from a few hundred dollars for a modest home to hundreds of thousands for a
major development. For example the fees on a hotel project such as the Mandarin
would increase by nearly $100,000 for planning permission and $275,000 for a
building permit.”

David Gibb of construction company
Hurlstone Ltd. put the changes in perspective for some smaller projects.

“There are two main fees that need
to be paid when you are looking to develop/build a house or condo and it looks
like both of these fees have increased from 100 per cent to 500 per cent with
some almost 1,000 per cent,” he said. 

“If we were to recalculate the increase
in fees for some of our larger projects the increased costs is over $75,000 per
development. If you intend on developing a 25,000-square-foot condominium
project your total costs will increase over $50,000.”

Neil Rooney, managing partner of
Exeter Property Development noted the fee increase simply adds more owner cost
to a project.

“New builds will feel the strain
when the pricing comes out – existing inventory, residential and commercial
will just be even more attractive,” he said.

“We are cheap on the world resort
property scale right now.”

Mr. Steward added that although his
company assumes the fees may be justifiable on some grounds, it will do nothing
to help Cayman’s already slow construction economy.

“I think many people in our
industry are understandably concerned as to whether this is a wise move at
present when we are struggling,” said Mr. Steward.

“We appreciate government
departments have a bottom line as well; however, professionals in our field
have taken substantial time or pay cuts as a means of weathering the recession.
We cannot simply increase fees to cover shortfalls in revenue – we are forced
to become leaner in our financial management. We must wonder why the seemingly
minor reductions in public sector expenditures cannot be more proportionate to
related sectors of the economy.”

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