Every municipality in Rhode Island is vested with the power to establish a formula to calculate building permit fees for development within its jurisdiction. Building permit fees are meant to offset the cost for municipalities to: 1) review plans for building permits; 2) oversee and regulate building and construction; 3) conduct necessary inspections; and 4) issue certificates of occupancy. However, the current piecemeal system has resulted in significant differences in building permit fees from municipality to municipality. More importantly, the current system has resulted in building permit fees in excess of the actual cost to municipalities to approve and oversee construction. As a result, the Rhode Island Builders Association brought a class-action lawsuit against three municipalities challenging the methodology for calculating building permit fees. See Rhode Island Builders Association, et al., v. Pagliaro, et al., C.A. No. PC-2005-5919 (R.I. Super. Ct. 2005).[1] These issues are amplified for construction of large developments. Given that building permit fees for large developments can be well in excess of a million dollars, these fees can serve as a significant hurdle to the economic viability of large-scale projects.
To address these issues and ensure consistency across the State, the General Assembly enacted an amendment to the building permit fee computation statute, which went into effect on July 10, 2015. R.I. Gen. Laws § 23-27.3-119.0, as amended, states:
Based on this amendment, it is clear that the General Assembly intended to establish a statewide formula and ensure that high-value construction projects are protected from excessive building permit fees through the use of a decreasing multiplier. The Legislative Council notes appended to the legislation further supports this analysis:
This act would provide that fees paid for construction permits shall be assessed by all municipalities using a formula established and/or approved by the Rhode Island building code commission which has multipliers that decrease as construction costs increase in value commencing on July 1, 2016. (Emphasis added.)
The statewide new building permit fee formula will be promulgated by the R.I. Building Commissioner to all municipalities in Rhode Island on December 1, 2015. The new formula will go into effect on July 1, 2016. This new statewide building permit fee formula will likely help stimulate larger construction projects across the state and eliminate the questionable legality of some municipalities’ building permit fee formulas.
[1] This class-action lawsuit resulted in a settlement paid by three municipalities to those who were aggrieved by the excessive building permit fees.
