Palm Coast Building Department Surplus of more than $6.2 million at Odds with Florida Statues. Audit Recommendation to Correct Problem Ignored for a Year.

Law is very specific. It’s not a “rainy day” fund.

January 4, 2008 – Palm Coast, FL – The Palm Coat Building Department is unique. It pays for itself by collecting permitting fees and fines for code violations. This should be good news to local taxpayers but the law is very specific about how these funds are to be used and controlled. By accumulating a $6.2 million surplus, by failing to account for earned interest, and by neglecting the city auditor’s recommendation to tighten oversight of funds, the city demonstrates either a lack of understanding of the statute or a willful intent to ignore it.

What the law says:

• “…local governments may provide a schedule of reasonable fees…These fees, and any fines or investment earnings related to the fees, shall be used solely for carrying out the local government’s responsibilities in enforcing the Florida Building Code*.” 
• “When providing a schedule of reasonable fees, the total estimated annual revenue derived from fees, and the fines and investment earnings related to the fees, may not exceed the total estimated annual costs of allowable activities.”
• “A local government shall use recognized management, accounting, and oversight practices to ensure that fees, fines, and investment earnings generated under this subsection are maintained and allocated or used solely for the purposes…”

What the 2006 Palm Coast City Audit says:

• The annual audit states that the revenues from the building department “were not closely monitored and recommended “the City closely monitor revenues and cost related to this function going forward and implement a policy regarding any unspent revenues.”

What Palm Coast has done:

• During the period of heavy construction in recent years, the Palm Coast allowed fees and fines to accumulate. The currently balance exceeds $6.2 million, approximately three times the building departments annual budget. The actual amount in the account is not known since interest for the past several years has not been reconciled. The actual amount, including interest, is likely much higher.
• In a December 11, 2007 council workshop, council and city staff discussed maintaining the surplus for a “rainy day” or possibly use it to encourage “green building.” Neither use is permitted by the statute. One reference to the surplus termed it “a nice problem to have.”
• No action has been taken on the auditor’s recommendations. The accrued interest earned by the account has not been reconciled with interest earned by other funds with which the Building Department’s fund is commingled.

Permitting fees fell substantially in 2007. The Building Department is currently not taking in sufficient funds from fees and fines to cover its annual budget. However it would take years of slow growth to deplete the bloated surplus. Palm Coast needs to move quickly to act upon the auditor’s recommendation.

*  From the statute:

"As used in this section, ‘enforcing the Florida Building Code’ includes the direct costs and reasonable indirect costs associated with review of building plans, building inspections, reinspections, and building permit processing; building code enforcement; and fire inspections associated with new construction. The phrase may also include training costs associated with the enforcement of the Florida Building Code and enforcement action pertaining to unlicensed contractor activity to the extent not funded by other user fees."

"The following activities may not be funded with fees adopted for enforcing the Florida Building Code:"

1. "Planning and zoning or other general government activities."
2. "Inspections of public buildings for a reduced fee or no fee."
3. "Public information requests, community functions, boards, and any program not directly related to enforcement of the Florida Building Code."
4. "Enforcement and implementation of any other local ordinance, excluding validly adopted local amendments to the Florida Building Code and excluding any local ordinance directly related to enforcing the Florida Building Code as defined above.”