Valuation: The estimated total cost of a construction project — including labor and materials — used by building departments as the basis for calculating permit fees, typically expressed as a dollar amount per square foot or as a total project cost.
How Valuation Affects Permit Fees
Most cities use a sliding fee schedule based on project valuation: higher valuations result in higher permit fees, but the fee per dollar of valuation typically decreases at higher amounts. A $10,000 project might have a fee of 2% ($200), while a $500,000 project might have a fee of 0.8% ($4,000). The exact formula varies by city.
How Cities Determine Valuation
Cities use two main methods. Some cities use the ICC Building Valuation Data table, a national standard published by the International Code Council that sets per-square-foot construction costs by occupancy type and construction class. Others require applicants to submit the actual contract price or a reasonable estimate. Some cities use the higher of the two. Using the ICC table often results in higher valuations — and higher fees — than actual contract prices for budget projects.
Understating Valuation
Deliberately undervaluing a project to reduce permit fees is permit fraud. Building departments often compare submitted valuations against ICC tables or local construction cost benchmarks, and may require documentation (contractor bids, contracts) to support submitted values. Significant undervaluation can result in additional fees, permit revocation, or a stop-work order.
Valuation and the Permit Fee Cap
Some cities cap permit fees as a percentage of project cost to prevent fees from becoming prohibitive on large projects. California cities, under state law, cannot charge permit fees that exceed the city's actual cost of processing the permit — making California permits generally more predictable than in other states.