GOSHEN — Facing a forced reduction in the amount the city can legally collect in rental registration fees, Goshen City Council members recently approved the creation of a new rental inspection fee with the goal of replacing some of that lost revenue.
Prompting the creation of the new rental inspection fee is a recent Indiana Supreme Court decision capping rental unit registration fees at $5 annually.
According to Mark Brinson, community development director for the city, Goshen currently has about 5,080 rental units that are registered with the Goshen Building Department. Those units are inspected every three years on average.
Until recently, city code allowed the Building Department to charge a registration fee to cover the cost of registering the properties, Brinson explained. The fee for 2019, which was set at $37 per unit and covered a two-year period, also went toward covering the cost of the city’s rental inspection program.
However, a March ruling by the Indiana Supreme Court significantly reduced the amount of funding the city can legally collect through its rental unit registration program.
Given that Goshen has had its registration program since the late 1970s, the city had been exempt from a 2014 Indiana law capping fees for such programs, Brinson explained. However, the March ruling by the Supreme Court determined that exemption to be unconstitutional. As such, Goshen must now comply with the Indiana code limiting registration fees to $5 annually.
As a result of that court decision, the city’s annual registration revenues will drop from $78,000 per year to $8,750, creating a funding gap for the city’s rental inspection program of $65,750 annually. Without another source of income for the program, Brinson said the program would need to be supplemented through the city’s General Fund in order to continue operating.
As the new state statute only caps registration fees, and not inspection fees, city officials began looking into the creation of a new rental inspection fee that would essentially replace the city’s rental registration fee as the primary funding source for the city’s rental inspection program.
According to Brinson, such a change required a modification to portions of the city’s Neighborhood Preservation and Building Department Fee ordinances, which is what council members approved during their July 2 meeting through the passage of Ordinance 5001.
As approved by the council, Ordinance 5001 states the owner of a rental unit that is inspected must pay an initial inspection fee, the cost of which will cover the time to schedule an inspection appointment, the travel of a city employee to and from the inspection, the time to conduct the inspection, the preparation of the inspection report and the first follow-up inspection.
While the fee had originally been proposed as a flat $55, the final language approved by the council sets the initial fee for inspection of any rental unit at $45, and then the fee increases to $50 on Jan. 1, 2021, and again to $55 on Jan. 1, 2023.
Also included as part of the new program is the added language stating that at the time an inspection is scheduled, the building department will mail a notice of the inspection to the occupant of the rental unit to be inspected. The lack of such a notification option in the city’s previous inspection program had been a sticking point for some on the council, particularly when it came to recognizing occupant privacy rights.
Other notable language highlighted in the new inspection fee program ordinance includes:
• A section noting that if an inspection is based on a complaint or other specific reason that a rental unit may not meet the requirements of city code and the inspection does not result in the discovery of any violations, the city will not charge a fee for the inspection.
• A section noting that the city will not conduct an inspection in the absence of a specific complaint or other specific reason to believe that a rental unit does not meet the requirements of city code if the rental unit is part of a rental unit community that is managed by a professional real estate manager, which includes the owner of the rental if the owner manages the real estate.
• A section noting that a rental unit which is not covered by the Goshen code section which has to do with larger operations, five units or more, will not be inspected more than once every three years, unless the city receives a specific complaint, has another specific reason to believe that the rental unit does not meet the requirement of Goshen city code, or previous inspections have shown the rental unit to be in an unsafe condition.
“I really appreciate these changes,” council member Mike Orgill said of the approved ordinance, noting that he was especially appreciative of the addition of the mailer for the rental occupants. “I think that’s very powerful that we take our constitutional duties serious and ensure that people at least have the opportunity to preserve their privacy. So thank you for that. I also like the part about taking away the fee in the event that it’s complaint driven. That only serves to eliminate harassment, and that’s a wonderful thing.”
TOO MANY FEES?
As the sole council member to speak out against the new inspection fee program, council member Doug Nisley said he feels local renters and rental property owners are already paying more due to recently approved school referendums and the state’s 2 percent property tax cap on rental properties, and doesn’t feel additional fees should be imposed.
“I’ve talked to quite a few renters, and they said their rent has gone up from $20 to $70 a month because of those two things. And they also told me that if it goes up more that they won’t be living in Goshen because of it,” Nisley told the council. “We’re always stressing that we want affordable housing, and I just think that by adding fees onto the renter — because it’s going to be passed down, that’s business — I’m more on the renter side of this part of it, probably. I know a lot of people that rent, and have talked to them, and they’re scared of more fees.”
In response to Nisley’s concerns, Goshen Mayor Jeremy Stutsman pointed out that the new rental inspection fee will essentially be revenue neutral when compared to the city’s former rental registration fee, and will in most cases not result in higher fees for rental property owners than they were already paying through the rental registration program.
“With the changes we’ve made, we will be generating less money per year. This will be neutral to a decrease,” Stutsman said of the new program, noting that even when the full $55 inspection fee comes into play in 2023, if a landlord is taking care of their property and they’re only inspected every three years, that fee would equate to only about $1.50 a month. “The only circumstance where it might cost them more is if they’re not taking care of their properties and they end up getting reinspected.”
For her part, council member Julia King noted that she, too, has spoken with a number of renters in her district, the majority of whom have expressed a desire to keep the inspection program in place, and thus support the new rental inspection fee.
“I, too, would look at this from a renter’s perspective, and people I hear from want to make sure that they have safe housing, that the conditions are livable, and that inspections lend themselves to that,” King said of the need for the fee. “To me, this is a public health and safety issue, and I think we talked about this before about the importance of an inspection. We have restaurants inspected, etc. It’s a business exchange, and looking out for the person who is living in that house. I think we need to have that, and have a way to fund it as well.”
In the end, a majority of the council’s members agreed, and a vote was passed 6-1 in favor of approving the ordinance establishing the new rental inspection fee on both first and second reading. Nisley’s were the sole ‘No’ votes.
John Kline can be reached at email@example.com or 574-533-2151, ext. 315. Follow John on Twitter @jkline_TGN