Restaurant and retail businesses are not only contending with the economic fallout of COVID-19, but they are also wading through the City of Vancouver’s byzantine processes for business permitting and licensing.
A report released earlier this year by LOCO BC, an organization that performs research for the best practices for independent businesses, found that the average wait time for permits and licensing in Vancouver is 8.2 months.
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As a result, the average economic loss per business permit or licence is $721,808, with each week of wait time resulting in an average loss of $31,160 per week per business, which includes opportunity cost losses.
This includes weekly losses of $18,903 in revenue for the business, $5,395 in sales for supply chain providers, $5,044 in income from the new employment the business could have generated, and $1,818 from leasing costs.
Over the span of the entire average wait time, this is equivalent to $474,171 from lost revenue, $104,703 from lost employment, $103,715 from lost supplier sales, and $32,219 from leasing.
The study’s partners include the Downtown Vancouver Business Improvement Association, Blueprint, Building Owners and Managers Association of BC, and the Vancouver BIA Partnership.
The findings are based on a survey of a range of businesses.
Of those that are retail businesses, the average losses totalled $803,500, including $570,400 in costs to the business and $233,103 in costs to the local economy.
Restaurant businesses suffered $950,140 in total on average — $662,315 to the business, and $287,830 to the economy — while service businesses experienced a hit of $110,930 on average, with $78,083 to the business and $32,844 to the economy.
A single bar business was a respondent to the survey, with this business recording a $24.875 million loss from city delays, including $13.625 million to the cost of the business and $11.25 million to the local economy.
Each business in the survey, on average annually, provides employment for 16 people, creates about $1.5 million in revenue, acquires $600,000 in goods from suppliers, and pays $137,000 in leasing costs. All of these activities keep the economy flowing.
But this does not include other indirect cost implications as a result of the municipal government’s permit and licensing delays.
These added costs average $27,622.68 per business, including lost revenue on liquor sales for an existing business, overtime paid to contractors to speed up construction after the city’s delays, additional lease costs for a new or existing space when moving a business to another location, increased construction cost from the original budget based on a more simplified permit process, new costs for drawings and industry professionals unanticipated by the original application, and even overtime paid by the business to City of Vancouver staff.
“City of Vancouver staff lack a customer service approach”
Optional overtime costs for city staff paid by businesses to expedite an application are based on the municipal government’s estimate of the number of hours and the cost on a case-to-case basis, but all survey respondents indicated their cost was inexplicably the same at $3,000.
Other indirect costs that are not calculated and quantified as a result of the uncertainty from city delays include the inability to build a client base, inability to hire specialized staff such as chefs, and stress on business owners and their families, such as mental health impacts and financial security.
In some situations, businesses are required to perform expensive building upgrades ahead of time, even though there is no guarantee a final permit will be issued.
“Together these challenges contribute to an environment that causes instability and uncertainty for businesses in addition to increasing costs. Businesses can’t estimate time or costs of even the simplest renovations,” reads the study.
“The complexity and length of the process creates a disincentive for businesses to follow the rules; some businesses proceed with small renovations without permits, and those who get permits are then put at a disadvantage for abiding by the rules.”
Moreover, the survey respondents noted that “City of Vancouver staff lack a customer service approach” and show “little concern” for the various negative impacts of wait times on their business.
City staff in permitting and licensing also have poor communication not only with the businesses, but also between themselves. There is poor coordination between city departments in sharing information and coordinating permits for greater efficiency.
The report offers a number of recommendations to improve the processes to become more efficient and reduce costly wait times.
Processes should be streamlined, especially for simple permits, and there should be a new business-friendly and client-service approach. The study’s authors also recommend holding city staff to established performance standards — for inquiry response times and application processing and decision times — to ensure stability, predictability, and accountability to businesses, which is also practiced by the municipal governments of Calgary, Regina, Toronto, Ottawa, and Halifax.
Additionally, the process should be more transparent, the required information should be clear and readily available, checklists and roadmaps should be developed to assist businesses, and there should be a single point of contact — an “account manager” to manage each application.
Responses to inquiries from businesses should be provided in writing to avoid inconsistencies. When inconsistent information is provided by different staff or departments, the City of Vancouver should bear the responsibility of the mistakes that are made by finding a solution, such as expediting the process and allowing regulation relaxations to move forward.
In other areas of permitting, the City of Vancouver has been developing and testing new processes to expedite applications for low-density housing. Review processes for development permit applications for certain types of projects, such as non-market housing, have also been sped up.