GOSHEN — City officials are considering a new $55 rental inspection fee to make up for an expected revenue loss from a similar fee of nearly 90 percent.
Goshen currently charges landlords a $37 fee to cover the cost of registering and inspecting rental properties. There are 5,082 rental units registered with the Goshen Building Department, which are inspected every three years on average, according to Community Development Director Mark Brinson.
But an Indiana Supreme Court decision on the constitutionality of fee exemptions will sharply cut the amount that Goshen can collect. The March ruling means that Goshen, along with other cities including Bloomington and West Lafayette, has to comply with a 2014 Indiana law that limits registration fees to $5 annually, Brinson said in a memo to Mayor Jeremy Stutsman ahead of Tuesday’s council meeting.
Brinson said the $5 limit on registration means that revenue will drop from $78,000 a year to $8,750. He is proposing a new $55 rental inspection fee, which is not capped by state law.
It would be charged to property owners on a per-unit basis, after an inspection has been conducted by the Building Department. The $55 fee that council will be asked to vote on would generate $93,170 a year, if the city keeps inspecting each unit every three years on average, he said.
He said $55 would cover the initial inspection and one follow-up inspection if needed, but wouldn’t be enough to fully fund the existing rental program.
Even $78,000 in revenue wasn’t enough to cover the city’s true costs, he said. The rental inspector’s wages and benefits are around $74,500, but the city legal department also has to spend a lot of time on enforcement while the Building Department office assistant spends a quarter of her time giving administrative support.
There are also daily transportation expenses in traveling to inspection sites that aren’t funded through rental fee revenues, he said.
2014 law and exemption
Brinson on Friday said the state’s 2014 law was passed in response to complaints from apartment owners that some cities were charging excessive fees.
“This may have been a valid argument in some communities,” he said. “The City of Hammond attracted statewide attention when it increased annual fees from $10 per unit in 2004 to $80 per unit in 2010.”
He said Hammond justified such a dramatic fee increase as a response to a 2010 constitutional amendment imposing tax caps on rental properties.
Bloomington and West Lafayette lobbied for an exemption from the 2014 law because as college towns with an unusually high number of rental properties, they believed they had a greater need to fund the cost of their rental inspection programs, he said. The law allowed exceptions for communities that had created rental inspection programs before 1984.
“Goshen was one of the first communities in Indiana to pass a local ordinance requiring the registration and inspection of rental units,” Brinson said. “This ordinance was passed well before 1984, automatically qualifying Goshen for the exemption.”
In striking down the exemption as unconstitutional, the state Supreme Court justices said Bloomington and West Lafayette weren’t unique in having a high percentage of renter-occupied units. They noted in their ruling that rental units represent about 67 percent of housing in those two cities, but also 58.5 percent in East Chicago, 49.2 percent in Elkhart and 47.3 percent in Gary.
Elkhart Building Commissioner Jim Holtz said Elkhart is not affected by the court decision because City Council abolished rental registration in 2017. Council ended the program, which began in 2006, after questioning its effectiveness and the city’s ability to fairly enforce the ordinance.