For years the city of Maple Valley has relied on single family residential permits as a significant revenue stream. Although it continues to run strong, city officials say it is within a few years of drying up.

During a presentation to the City Council May 14, Finance Director Tony McCarthy stated the city has seen revenue estimations well above what was budgeted for the year. This includes single family permits (SFP). City staff projected they would receive 70 SFPs this year.

According to McCarthy, however, the city has issued 112 permits as of July and that number could possibly rise to 162 by the end of the year. This would be the highest number of permits since 2006, when 269 were issued.

The above estimates are a repeat of last year, when the city planned for 50 SFPs to be issued. Ultimately, the city received around 150 by the end of the year. This led the city to give a higher estimate for 2012, albeit not too high.

McCarthy has stated in numerous interviews that the city tends to underbudget spending and underestimate revenue in order to account for unforeseen changes.

“We would hope that when we put in 70 we would meet 70,” he said. “We never thought we would be nearing it at this rate half the year.”

City Manager David Johnston also stated the number of permits came as a surprise in spite of the underbudgeting.

“In the budgeting it’s good to underbudget a good source of revenue and appreciate when it’s wrong in our way,” he said. “We tried to be more on the conservative side, more realistic. And if we err like we do now, that’s good. But we don’t want to find ourselves budgeting and seeing it doesn’t happen. But we never thought we’d have 112 in half the year.”

Johnston also stated that the high SFP permits seems to contrast with the bleak housing market economists have predicted.

“We never expected it to be that high or if it was to be that high it would be for the year, not for the half year,” he said. “Because what we hear in the media and with housing experts is that we’re still in a recession. We know our city is an exception to the rule when it comes to the housing market and new family permits, but we were questioning how long that momentum can go, because we have underestimated the permits the last three years, because we are sensitive to the impact of the economic recession.”

In addition to the permit estimate, utility taxes are estimated to be 104 percent budgeted, real estate excise taxes 111 budgeted, development permits 175 percent budgeted and park impact fees 226 percent budgeted.

Johnston added, however, that soon the city won’t be able to under-budget SFPs anymore.

“There’s got to be something (else). We read about how our area is part of King County is leading in two years with foreclosure and short sales. We’re like ‘My god, the supply’s out there how can we keep this going on?’ And for some reason it’s still going on.”

Both McCarthy and Johnston stated that it is a soon-to-be exhausted revenue source. Additionally, even though there are permits issued for the single family units, many lots have remained empty years after the permit was issued.

“We’ve got a lot of houses that got permitted,” McCarthy said. “But they haven’t sold. Our biggest long term problem is we’re running out of lots.  Most of the lots we got approved housing on, we haven’t had any new plats in a while. That’s going to be what’s coming.”

Johnston stated that at the current rate permits are being issued the city will run out of lots in four years.

Once residential permits cease to be a viable revenue source for the city, he said, it may have to turn to other options such as transportation benefit districts, levy lid lifts and debt financing for capital projects.

“That’s one of the reasons economic development has to be a major issue for our city now,” he said. “We can’t say we’ll wait until residential permits end. You’ve got to get going before you’re faced with that and have commercial development paying impacts fees and commercial development giving people a paycheck….It’s all tied together. There’s a lot of interdependence that complicates matters. You like to solve one problem and then go other.”