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Ocean City

City permit numbers still on rebound post-’08

(Nov. 14, 2014) If the story of great empires the rise before the fall, the story of construction in Ocean City over the past seven years is the fall before the rise, before the next rise.

Data from the city’s Buildings Department indicates that, while the town filed 96 fewer building permits over the past fiscal year than in FY13, the total value of the work performed rose a whopping $15.5 million, to a level not seen since before the financial collapse at the end of 2008.

“We’ve gone down in applications, but the dollar value is way up,” said Kevin Brown, the city’s chief building official. “The reason for that is a handful of high-value hotels that fell into this past fiscal year.”

Following the recession, the city saw a widening gap between the number of total building projects, large or small, relative to the total value of the work. This was due to high-value projects being abandoned or delayed, while a volume of low-value projects continued to flow in.

This gap hit its high point around FY11 (see chart). Fiscal years run from June to July, with FY11 starting in June 2010 and ending in July 2011.

But the gradual recovery of permit volume from FY09 to FY11, despite the continuing drop of total value, precipitated an eventual comeback in total values starting with FY12. Permit volume has since leveled off, while total value is still rising, closing the gap.

As many Realtors and builders have claimed, the recovery of both figures, one following the other, is likely linked. An increase in the volume of low-dollar projects up through 2011 improved the resort’s existing properties, which in turn improved the real estate attraction of the areas around them, which in turn attracted new, high-value construction.

“You can see that change coming and I’ve seen it in here,” Brown said. “To me, it’s a good thing that people are spending on improving what they have. It has helped us bounce back.”

In fact, the effect is likely more pronounced taking into account that many small projects are no longer subject to city scrutiny. Prior to the recession, the city required permitting for all work of $1,500 or more. That minimum was later raised to $5,000.

“It’s a trade-off,” Brown said. “The goal is to encourage people to repair what they have an to make it easier for them to do that.”

Naturally, the city lost the permitting fee revenue from jobs between $1,500 and $5,000, but the change has kept the workload on Buildings Department staff from skyrocketing as the economic recovery continues.

“It’s less stress on the department and on the builders in the current climate,” Brown said. “The hard part is figuring out how high you can raise the line before the city starts losing money, and before the projects get big enough that they need oversight.”

Also of note is a rise in the value of non-structural permits issued by the Buildings Department. Electrical and mechanical installation, even if it is not part of building construction or re-construction, is reviewed by the department if beyond the threshold value.

Non-structural electrical work jumped from $501,279 in FY13 to $1,554,015 in FY 14, and mechanical increased from $1,350,279 to $2,192,259.

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