St. Petersburg is holding off implementing a planned 25 percent cut in building permit fees because of the impact of Covid-19 on the development community.
As developers struggled with delays in getting materials and labor issues, as well as general economic uncertainty, the city saw a 15 percent reduction in permit revenue in fiscal year 2020, which ended Sept. 30, and a 20 percent drop in permit revenue in the first quarter of FY 2021, Don Tyre, building official for planning and development services, told the City Council’s Budget, Finance and Taxation Committee on Thursday.
That could leave about a $3.14 million gap between the budgeted amount of revenue for the year, $10.5 million, and the actual revenue that comes in this fiscal year, he said.
“It’s hard to forecast the impact of Covid right now. A lot of our funds and revenue come from the larger projects, which are still extremely strong in the development community,” Tyre said.
Although United Insurance Holdings, or UPC Insurance, scrapped a plan for a new downtown headquarters, that’s the only major project not moving forward that Tyre knows about.
“There are three large projects that are planned and permits should be issued this quarter. Two of them are already under construction with foundation permits — the Saltaire project next to the Hilton downtown, the Ascent project which is a high-rise next to the Duke Energy building downtown, and of course the Red Apple project, which will end up being the tallest building in the city, right off Central Avenue,” Tyre said. “Those will probably help bring that average up and this fiscal year it may help to reduce that downturn of the 15 percent.”
One year ago, the city unveiled plans for the 25 percent reduction in permit fees. A state law related to construction and the Florida building code that took effect in 2019 prohibits local governments from carrying forward a specific amount of unspent revenue, based on operating budgets over the previous four years. The state law requires the local governments to use excess funds to rebate and reduce fees.
To help draw down on the excess and increase service levels, the St. Petersburg planning and development services department beefed up its inspection and plan examiner staff and purchased some additional vehicles. But the expected fee cuts were put on hold when the pandemic hit in March, and Tyre recommended Thursday that they remain on hold for another several months, until the city has a better idea of its revenue for FY 2021.
“The development community is still suffering delays in material shipments, subcontractors, just the number of workers, so it is having a significant impact,” Tyre said. “Right now a 15 percent downturn is probably not that significant in the bigger picture because it’s across the board. Residential construction is still strong and had a slight downturn. Same with renovations. Commercial has probably had the largest impact, for restaurants, banks, tenant build-outs. The larger projects are still relatively strong … They’re probably going to carry us through this fiscal year.”
When Covid hit, the planning and development services department also transferred to 100 percent electronic permitting and moved away from paper plans.
“Customer service-wise, that had an impact on both staff and the development community. There was a significant learning curve in the first three to six months, changing to that system,” Tyre said.
The City Council committee is expected to re-evaluate the need for a potential fee cut in June or July.
The status of development in St. Petersburg
Construction values in St. Petersburg hit a record $782 million in fiscal year 2019. That dropped to $660 million in FY 2020 and are forecast to be about $600 million to $650 million in the current FY 2021.