Inspection Competition: Townships Find They Have Options

Township inspector

Like businesses competing for customers, local units of government compete for "customers" — residents, nonprofits and business establishments. They also compete with other governments and private operators over the cost and quality of their services. Some townships in Isabella County are providing a great example of competition among governments.

Cities, villages and townships are responsible for ensuring building code compliance within their boundaries, but many townships are too small to provide inspections and other state-mandated services. To meet these requirements, local governments often share providers or contract with other municipalities. Fremont, Deerfield and Rolland townships in Isabella County use an interlocal government agency called the Joint Construction Code Authority, created to monitor compliance with building codes.

The JCCA was started in 1992 (and at the time included Nottawa and Sherman townships) to offer townships quicker and less expensive building code services. Prior to the code authority's inception, townships referred businesses and developers needing permits to the county, but long waiting periods for inspections and approvals frustrated many residents. In response, some Isabella businessmen worked to create the JCCA.

Townships that belong to the JCCA have options, since the JCCA competes with Isabella County to provide inspection services. Other Isabella cities and townships rely on the county for building code compliance. Some municipalities do offer their own building permitting, but the county provides all electrical, mechanical and plumbing code services.

Recent construction slowdowns, however, have threatened the JCCA, since its only source of revenue is permit fees and townships can be held accountable for excess liabilities. Sherman and Nottawa townships left the JCCA in early 2009 — Sherman had issued only eight permits in 2008. Lack of building means lack of revenue, and some township officials were concerned about the JCCA's solvency.

Sherman Township's experience is typical for Michigan. The business of permitting has hit tough times as the state's economic malaise has slowed new construction to a trickle. In the first half of 2009, only 2,840 new home permits were issued statewide, down from 23,857 over the same time period in 2005.

To stay competitive and solvent in tough times, both the JCCA and Isabella County are responding. Isabella County cut one inspector from its staff and reduced the hours for a clerical position. The JCCA eliminated an office worker and per diem compensation for board members, allowing the authority to drop its rates. Since JCCA inspectors are contracted for and are paid a percentage of the building permit fee, the authority does not pay employee benefit cost increases for them.

The decision to form or remain in such a joint authority goes beyond just the dollars and cents: Stakeholders who receive these permits often have strong opinions. Last year, contractors in Iosco County voiced their opposition to a county commissioner's proposal to privatize its building department. Their opinions are valuable, since it is important for contractors to have good relationships with their regulators.

On the other hand, contracting with outside organizations lets governments make a fresh start in service provision. It also adds pressure to make sure the services are the best possible. Competition between multiple regulatory authorities gives individuals more options and allows townships to better serve residents.

James Hohman is a fiscal policy analyst at the Mackinac Center for Public Policy.