Enterprise
Permitting software for larger organizations.
Long permit and license wait times come at a high cost to citizens, businesses, and local and state governments alike. Whether it’s a developer looking to build, a homeowner undertaking renovations, or a new business awaiting a liquor license, delays in processing times are costly, and result in considerable economic loss. With a push to digital means of communication, and a bigger need than ever to support economic development, governments that aren't able to support an expeditious permitting process are facing major budget shortfalls while doubly slowing down the pace of commercial and residential development. By fast-tracking permits, typically by implementing government permitting software, state and local governments can cut costs, increase revenue, and foster regional economic development.
When looking for sources of revenue, reducing wait times for government-approved permits can bolster revenue streams, and contribute more broadly to community value. By going digital and implementing government permitting software, local governments can accelerate and streamline processes, make them more predictable and transparent, and most importantly, increase revenue.
The Cost of Lengthy Permitting and Licensing Delays
While not the only government facing challenges, research looking at processes in the City of Vancouver, BC, Canada, clearly underlines the economic impact of delays within the permit and/or licensing office. LOCO BC, a nonprofit local business alliance, found that the City’s average processing time of 8.2 months causes significant economic loss per permit/license -- more than $721,808 CAD. This takes into account known costs such as lost revenues, leasing costs, and losses related to lost employment and supplier sales.
Source: The High Cost of Permitting Delays in the City of Vancouver, LOCO BC, 2020.
In the study, LOCO BC found that just a 1 week reduction in wait times would financially benefit the City, as leasing costs- over $2.6 million from just 30 businesses surveyed - make up a significant portion of the City’s tax base through business property tax. In 2020, property tax was the main source of city operating revenue, making up 55%, while licensing and development fees made up 6% -- the third largest source for the City.
Source: City of Vancouver, 2020 Budget Highlights
Comparably, in Newark, New Jersey, upon realizing the significant economic impact of an average 12 months waiting time for a business license, the City set out to improve the process by moving online. In doing so, the City reduced approval times by 90%, from 12 months to 30 days.
Similarly, in the City of Austin, Texas, in a proposed program for expedited permitting, the Department of Development Services looks at the benefits of expedited permitting (Table 1), and notes that delays in the development process reduce property tax revenue to the City, and often result in increased incidents of non-permitted construction. Furthermore, the department’s research found that lengthy processing times could result in a shift of projects to other cities boasting shorter development processes.
To save money, and increase revenues, municipalities and state organizations should look to leverage government permitting software. An efficient digital system will not only be financially beneficial, but beneficial to citizens’ satisfaction with their government too.
The Revenue Potential of Faster Permitting and Licensing Times
As expressed in the McKinsey article, Unlocking the Full Potential of City Revenues, central government funding for municipalities continues to decrease, and city populations continue to grow, putting increasing pressure on local governments to optimize their existing revenue streams. Primarily, these include service fees, fines, taxes, and other assets such as properties. One of the most profitable and easily attainable opportunities for improvement is in digital reform of permitting and licensing processes. Government permitting software works to optimize existing revenue streams, and to unlock new untapped sources of revenue.
A study by Pricewaterhouse Coopers, commissioned by the American Institute of Architects (AIA), looking at the relationship between building permit processes, local economic activity, and government tax revenues, concluded that the implementation of a more responsive permit process over a 5 year period could result in a 16.5 percent increase in property taxes, and a 5.7 percent increase in construction spending. The study goes on to say that communities with a more efficient building permitting process can gain millions of dollars in tax revenues in time, and significantly boost their economic development. With government permitting software, governments can expect processing times to accelerate by 75% or more, paving way for an increase in regional development.
Most often, jurisdictions that fast-track permitting processes benefit from increased outside investment in development as investors are drawn by quick turnover times and a simplified process; increased construction spending and job creation as the rate of development increases; and a permanent increase in local government revenue from property taxes and other building-related fees.
In the City of Pickering, Ontario, for example, a report to council on the potential economic and financial benefits of deploying an e-permitting system, projected that accelerated permitting processes would at a conservative estimate, result in an annual revenue increase of $645,000 CAD for the City. For context, the City’s population is ~90,000, so the potential revenue from a switch to e-permitting is significant given its smaller size. This estimate was derived from research showing municipalities that implement an e-permitting system can speed-up the issuance of permits by 30-90%, resulting in a steep increase in building permitting revenue. One such instance is in Miami, Florida, where the switch from paper-based processes to e-permitting led to an 80% reduction in plan review time -- from 322 days to 2 months.
Using the expected range of a 30-90% acceleration in permit issuance, and based on the City of Pickering, Ontario’s fiscal year 2018 permitting revenue of $2,150,000, the City report to council calculated a conservative, mid-level, and high-level estimation of additional projected revenue (Figure 7).
Source: City of Pickering Report to Council, City of Pickering, Ontario, 2019
Other potential revenue can come from reduced paper consumption when a city switches from an entirely, or mostly paper-based system. The Association of Municipalities Ontario (AMO), found that municipalities using e-permitting, or government permitting software, experienced up to a 72% savings in printing costs, and a reduction in hardcopy storage of over 54%. Such printing savings are shown in Salt Lake City, Utah, where, following a switch from paper to a digital permitting system, the City reduced paper consumption by over 500,000 lbs, equating to a cost savings of close to $1.5 million CAD per year (plus a huge, less easily measurable savings to the environment).
It’s clear that the potential cost savings for municipalities choosing a digital government permitting system are substantial, and that accelerating permitting processes can significantly increase local government revenue. And it’s not just financial gains that are attracting an increasing number of governments to digital systems -- there are numerous other benefits for governments, businesses, contractors, and citizens that make the switch to government permitting software a no-brainer.
Government Permitting Software Benefits: More Reasons to Make the Switch
Government permitting software benefits everyone, and provides an efficient way to cut down on long processing time without sacrificing regulatory standards.
Additional Benefits Include:
- Easy, straightforward online availability of all necessary permitting/licensing information.
- A standardized process: One central point of contact for permitting/licensing services that saves both the applicant and municipality time, money, and effort.
- Online information and availability simplifies and makes clear different regulations and codes.
- Mobile availability allows for real-time inspection and progress updates for all parties involved.
- Provides one centralized online platform for all internal departments and external agencies.
- Promotes economic resilience and development.
- Offers potential for more collected tax revenue that can not only help finance the system implementation costs, but also further organizational improvements.
- Creates a transparent and predictable process.
Ultimately, a digital permitting solution can save governments time, money, and resources; plus, it can add considerable revenue, and greater economic value to communities. See how Clariti's community development solutions can help you save time, issue permits faster, and deliver an exceptional customer and staff experience.