Causes
The Slowdown in Residential Construction
According to the U.S. Department of Commerce, new housing starts are down more than 60 percent compared to their peak in January 2006. With a dramatic drop in permits, building departments are seeing a dramatic drop in revenues.Further intensifying the problem is a steady decline in property values, which can be attributed to bargain-basement prices on foreclosed or near-foreclosure homes. In Atlanta, taxable values of 50 to 75 percent higher than sales prices are common in neighborhoods overrun with foreclosures and abandoned housing.
Overall Economic Slowdown
Fewer new starts, plus current projects being scaled back or suspended, result in lost revenue from permits, inspections, sales tax, property tax and use tax. In their Fall 2008 Trust Magazine briefing, The Pew Charitable Trusts estimates lost revenue will be as much as $356 billion in the next two years from decreasing property taxes alone.Lack of Financing Options
In this time of financial strain and increasing risk, even the most stable—and the most gutsy—developers are having difficulty securing loans from today’s extra-cautious lending institutions.Increase in Fixed Costs
Rises in fuel costs, healthcare costs, benefits and pension plans have increased the cost per employee. Overhead and general operation budgets are pinched as well.
Effects
Budget Crisis
With incoming funds slowing to a trickle in building departments (which have historically been “in the black”), many municipal, city and county budgets are upside-down.Layoffs
With no money to support the ongoing costs of employees, building departments are shrinking. The City of Atlanta, in spite of indications of market stabilization, has had to eliminate 1,000 positions, affecting nearly 200 people. Smaller communities don’t have enough work to keep a staff of one or two professionals busy.Compromised Safety
Out of a desire to balance the budget, service can easily suffer. In Oregon, the approval of Amendment 63 would have provided a minimum level at which a building permit is required. While measures such as this one address the issue of reduced manpower, will they compromise the safety of residents and public servants into the future? Departments are being forced to reduce expenses, but at what cost?
Solutions
Outsource Contract Providers
Without compromising on depth of resources, services or safety, building departments can convert fixed costs into variable ones. Many building departments hire and lay off as a way to manage budget and workflow, but they know that solution can be a detriment to service and safety.For a sustainable solution to the budget crisis, turn to an outsource provider, such as SAFEbuilt.
- Full-support or supplemental building department services keep service levels and safety at peak performance during slow and busy times
- Revenue sharing provides a no-risk source of funds—and appropriate levels of support
- Constant outside labor pool eliminates emotional and financial costs of hiring and firing to match economic conditions
- Depth of resources nationwide guarantees mobile teams for special or unpredictable short-term projects
- Outsourcing takes pressure off building department performance so that decision-makers can focus on other matter
