Not So Hidden Fees from Your Local Municipalities - PERMITS
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Not So Hidden Fees from Your Local Municipalities - PERMITS

Municipalities charge permit fees. This is not news to sign companies. But some spiraling permit costs may require a little more review to assure the sign permit fees are not revenue-raising devices. Read on...

By Richard Crawford, USSC Legislative Consultant

Get a better understanding of the current trend toward spiraling sign permit fee costs.

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  • The United States Sign Council has been contacted, on a consistent basis, by member sign companies with concerns and complaints about apparently excessive local sign permit fees. Every situation is unique, of course, but invariably the scenario involves installing a small sign job (say $1000 value) and the local municipality charging a permit fee ($300) that is not in line or commensurate or in proportion to the value of the job or the amount of time required to review the application.

    Based on all of the information at our disposal, it would appear that the current trend is toward spiraling sign permit fee costs. In part, many municipalities are interested in raising revenue across the board due to economic conditions. Secondly, increased costs may also be caused by the adoption of the International Code Council's (ICC) International Building Code (IBC) at the state and local levels across the US. The IBC contains certain technical provisions related to the permit process. These provisions were created in 2000 when the IBC was first published, but were not fully understood until the IBC gained traction by actual adoption and practice. The IBC is having a direct and unintended and/or unanticipated impact on the sign permit process and the total cost to Sign Owners, through sign companies, for sign work in general.

    Sign permit fees cannot be revenue-raising devices
    To the first cause - the desire to raise revenue - embedded in every state's jurisprudence is the principle that local fees (permits, licenses, etc.) cannot be enacted or applied as revenue-raising devices, nor as a tax. They are intended to cover the cost of reviewing the "application", and no more. There will be case law and there will be state statutes that give local municipalities the power to charge fees associated with licenses and permits. The specific statutes and cases will vary from state-to-state and should be researched for your particular locality. But this benchmark is certain: permit fees cannot be revenue-raising devices.

    Moreover, in regard to permits for On-Premises signs, even more scrutiny is required when dealing with sign fees and rates at the local level. Constitutional issues are raised when a municipality creates a sign permit fee structure that is excessive, because it is applying the fee structure to Speech, even Commercial Speech that is protected by the First Amendment. Fees and rates applied to plumbing permits and electrical permits, for instance, do not raise the same constitutional issues; but On-Premise signs must be viewed in a different light.

    Excessive fees on signs can act as a tax on Speech, and can raise legitimate issues of Prior Restraint under the First Amendment (conditioning the expression of speech on the prior approval of a government official - in this case conditioning the speech on payment of an excessive tax or fee). The fact that both Non-Commercial Speech and Commercial Speech may be affected is also highly relevant: Non-Commercial Speech has even greater protection under the First Amendment. Finally, the fact that some signs are typically exempt from the local fee structure can raise other legal and constitutional issues in regard to the outright discrimination between "speakers".

    Why are sign permit fees an issue for the Industry?
    Why is this an issue for sign companies and national sign associations? One may ask: isn't this really just the cost of doing business for Sign Owners and Sign Users, and not the sign companies? Shouldn't the Sign Owner be the one to complain about high sign permit fees and costs, and not sign companies?

    1. First, Sign Owners and Sign Users should complain about these fees, when they are excessive.
    2. By the same token, we are all sign professionals working in a particular sector of our economy, and we are experts in our field as compared to others, and we care what happens in our area of expertise. A local business may apply for one or two signs every 5 years; a local sign company may apply for 100 sign permits in a year, and can see the scope of the problem more clearly than the local business owner.
    3. Sign companies regularly advance permit fee costs for their customers; as fees creep ever higher, this becomes a drain on sign company resources. This situation may not seem like much at first, but if you consider that permit fees for standard sign work, say in the $5000-$10000 range, can approach $200-$300 per application, there are some real dollars involved here. Assuming that a typical shop needs to have at least 10 jobs of this type minimum in production at any one time, a sign shop can have over $3000 out there locked-up in sign permit fee costs. The arc of a sign project delays repayment: permit fees are paid in the beginning of a project (by the sign company), added to the final invoice when the job is complete, and then returned to the sign company maybe 2-4 months down the line from the start of the job. And the kicker is that no interest is ever charged on the permit fee outlay. What other industry regularly lends out money with no return on investment or interest charged?

      The quick-minded may suggest that there is a simple solution to this problem: you collect the fees upfront. While this may sound appealing, the realities of the situation may make this option less practical than it would appear:

      • other competitors in the market may not do this, and the sign company employing this strategy may appear uncompetitive;
      • permit fees are known when a sign contract is created only about 10% of the time; in fact, many towns won't even tell you the fees until after you have submitted the application and they have reviewed it, which is well after the contract is signed;
      • because towns vary significantly on how they charge for permits, and sometimes even the number of permits required, sign companies doing business across 25-30 municipalities will be forced to spend even more valuable, uncompensated time trying to track down specific fees for their contracts before they are signed;
    4. High permit fee costs that are not in proportion to the sign work involved can act as a tax on signs and as a possible deterrent to specific sign work. In fact, we have seen instances where high sign fees and a slow permitting process can cause some sign companies to completely disregard the need to obtain a sign permit, and they simply proceed to install signs without bothering with a permit application. With lack of enforcement at the local level, which we have also seen, this leaves the reliable, honest sign company in an untenable position, to say the least.

    Clarke Systems- Slatz Capture was designed to meet the challenge of change.

    Example: the Pizza sign name change
    XYZ Sign Company applies for a sign permit to change a plastic sign face in an existing freestanding sign; the sign already has a sign permit. The name on the sign has to be changed from "Joe's Pizza" to "Sam's Pizza" because of a change in ownership. The sign cabinet remains the same, the electrical service remains the same, the foundation remains the same; just the plastic inserts have to be removed and replaced on both sides of the sign.

    The job cost for this work is $1,002.00 + tax; this is an accurate ball park figure for this kind of job. The local town will require a sign permit fee of $300.00 on this simple sign face change (we have seen even higher fees for minor work FYI), valued at $1,002.00. A nearly 33% percent of cost permit fee.

    The amount of time required to review this type of application, which is a common application, would be less than an hour for a professional Code or Building Official. The Code Official actually does not have to spend much time in review, because the sign cabinet and size remain the same, and the sign can be refaced "by right", whether the sign is conforming or not.

    There is a question of whether the Building Official will conduct a field inspection of the sign faces, and actually bring a ladder out and climb up, open the sign cabinet, and measure the thickness of the plastic used, in order to confirm that the plans submitted were followed, in the interests of public safety. There may be a cost here. Some have argued that this is why a town can levy a charge for a sign face replacement. It certainly can't be based on the review of the name or speech or graphics, because those items (actual speech) are beyond the review of the local Code official, from a constitutional perspective.

    But in reality, let's be honest, this never happens. This isn't even an occasional or once-in-a-while occurrence; it truly never happens. And it would seem inappropriate for a municipality to charge a fee for a task that it will not be completing.

    Example: Cross Section of permit fees
    I was recently involved in a mini-conversion for a regional financial institution here on the east coast. The customer had acquired a smaller banking system 3-4 years ago and did not re-brand the new locations at that time. The customer preferred to leave the original bank name intact, with a "division of" notation added to the signs. Then, 3-4 years later, the branches were to be re-branded 100% with the new parent company name.

    Our task was to re-brand roughly 19 locations. The majority of the work involved new faces for existing sign cabinets, both freestanding and wall-mounted. There were very few truly "new" signs involved. This re-branding can give you a thumbnail view of the state of permit fees for fairly routine sign work. In this list, I omitted locations where little work was required and the locations where substantially more work was involved, to give you a sense of the average.

      Branch A: $855
      Branch B: -0-
      Branch C: $132
      Branch D: $264
      Branch E: $385
      Branch F: $60
      Branch G: $55
      Branch H: $435
      Branch I: $500
      Branch J: -0-
      Branch K: $558
      Branch L: -0-

    First, you can see that 5 of the 12 municipalities charged minimal fees or required no permit fee to swap-out sign faces and perform routine graphic changes. Historically, this is the manner in which local municipalities approached sign face changes: permits and fees were not charged for routine plastic sign face changes.

    For the remaining 7 municipalities, the average permit fee cost was $447.00. It is true that, in this case, the customer was not going to complain. It is also true that we advanced over $3000 on behalf of our customer at no interest for over 3 months, while the project was initiated and completed. And you can see the dilemma that sign companies face, as this was not the only project we were working on at the time, nor the only fees we had advanced for customers.

    Questions to be asked
    Most importantly, we need to ask what the legitimate and reasonable hourly charge is for the Building Official or Code Officer to review these types of sign permit applications. Please be aware that Courts are not allowing every possible and conceivable administrative "overhead" cost to be lumped into this charge. The local Taxpayers have already employed the Building Inspector or Zoning Officer and are already paying his or her salary (including Benefits, vacation, etc.) through local tax revenue. That is the appropriate legal mechanism for gathering funds to compensate Municipal employees.

    Questions that need to be asked are: what do surrounding municipalities charge for sign permits? What is the actual time required by a "professional" (Building Inspector or Zoning Officer) to review a simple Sign Permit application for a sign face change? A new freestanding Sign? A new 3' x 5' wood sign? What is the actual time required by professionals in other municipalities to review sign permit applications for the above types of signs?

    Towns are cutting back of course. Some municipalities that cannot support a full time Zoning Officer or Building Official hire part time staff; in other situations, the local municipal manager sometimes reviews applications. The point here is that some towns have mistakenly assumed that the salaries and benefits of staff are to be funded by the permit and license fees collected by the town; the thinking is that if permits and license fees do not support the salary of the local official, then fees need to be raised. This is based on some sort of libertarian calculus, where the users of the township "services" need to pay for the salaries.

    This again is a dangerous assumption because it is not permissible to treat permit fees as revenue-raising devices or taxes. The appropriate arrangement that can past legal review is where a municipality has a tax base - taxes are collected from a variety of sources - and then those taxes are apportioned by the residents to fund various municipal functions: township building, municipal employee salaries, street work, police department and so forth. Permit fees are merely incidental to municipal operations and serve to defray the cost of application review only.

    Permit Privatization
    There also is an increasing trend for municipalities to privatize parts of their Department operations. In these cases, the task of reviewing sign-related building or construction permit applications is given to an outside 3rd-Party agency or firm. The town no longer reviews the paperwork. The outside 3rd-Party completes the review and either issues an approval or a denial in accordance with municipal regulations. The outside 3rd-Party charges a fee for these services, which is passed along to the Sign Owner via the sign company. This fee is in addition to the actual town sign permit fee for zoning and the sign permit fee for construction. On top of that, Sealed plans by a licensed engineer may be required, which becomes another additional cost for the Sign User via the sign company.

    Interestingly, the impact of this privatization arrangement has been not to drive fees and costs down but, are you ready for this.…you can guess…privatization has dramatically increased costs and fees to the consumer and/or business.

    Here is an example of this type of situation, based on a recent synthetic monument sign permit application in the Mid-Atlantic region: Sign Zoning permit fee: $70; Sign Construction/ Building permit fee: $210.00; outside 3rd Party review: $250.00; Sealed plan by licensed Engineer: $475.00; total: $1,005.00. All of these fees were required for a simple monument sign sitting 5'-0" above grade with minimal excavation requirements, similar in fact to hundred and thousands of monument signs installed safely and professionally in many other jurisdictions.

    Conclusion: Potential Action in the future

    Option #1: Pay the fee / install the sign / challenge the fee structure

    An applicant can pay the fee, under protest, install the sign, and then bring an action against the municipality in regard to excessive fees, for a refund and to have the sign permit fee schedule declared unconstitutional under both the applicable state law and the US Constitution.

    Option #2: Refuse to pay fee / not install sign / challenge the fee structure

    The Applicant can refuse to pay the fee, not install the sign, and then bring an action against the municipality in regard to excessive fees, to have the fee schedule declared unconstitutional under both the state law and the US Constitution, including a claim for a Prior Restraint of Commercial Speech in that if you can't pay the excessive fee amount, this Town is saying you cannot exercise your right to speak, whether Commercial or non-Commercial speech, and the fee is so high, it constitutes a tax on speech.

    Option #3: Refuse to pay fee / install sign

    This approach may place the applicant in the worst legal position in that the applicant or the sign owner will be cited by the municipality and dragged into court as a defendant. All the claims challenging the fee structure will be made during the proceedings, but will be clouded by the fact that the applicant already violated the local fee ordinance.

    Option #4: Participate in the local legislative process

    We have seen instances where a local sign company is successful in bringing the excessive fee issue to the attention of the local governing body, and the local governing body acts on the request to review the fee schedule and reduce the permit fees charged to a reasonable level. If a local chamber of commerce or business association can be involved, this will give strength to the request, and increase the chances that some positive action will be taken.

    For further information on the sign permit fee issue, you can contact the author directly at: rick@ussc.org or rcmercer@verizon.net

    For a full list of supportive publications available from the United States Sign Council that cover a wide range of subject matter related to on-premise sign usage, marketing, construction, legibility, zoning, and traffic safety issues. Visit: http://ussc.org/publications.html

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