A new billing model for annual elevator licenses could be startling for some Ontario property owners and managers. Beginning May 1, the provincial Technical Standards and Safety Authority (TSSA) will introduce fee increases for its oversight services in tandem with bundling some costs that were previously invoiced separately into new upfront flat rates.
For example, it may appear that the license fee for elevators that serve four or five floors has tripled from $110 to $330. However, the rate will now include the cost of the periodic inspection and one follow-up inspection to a maximum of one hour. Beyond that allowable hour, there will be a significant upward spike in charges for necessary additional inspection time.
“Theoretically, the cost should be more-or-less similar to what owners were paying before, depending on the complexity of their elevators. The risk is that it initially may be confusing when it’s all billed as one package,” notes Rob Isabelle, chief operating officer with the elevator specialty firm, KJA Consultants, and a member of the TSSA’s elevating devices advisory council.
The TSSA promotes the flat rates as “fair, predictable and efficient” since licensees will receive just one invoice and will have a known fixed fee for their budgeting process. The new billing formula is part of the TSSA’s evolution to what it terms an “outcome-based regulator”, which directs more resources and staff time to elevating devices that are shown to pose a higher degree of risk for the public. Accordingly, it aims to derive a greater share of its self-sustaining revenue from the owners/operators of those devices, and also to create an assured pot of funds from prepaid fixed fees to underwrite non-income-producing risk reduction programs.
“The fee-for-service model currently in use by TSSA dates back to 1997 and is best suited to a prescriptive model with cost recovery focused largely on inspection,” an accompanying explanatory document states. “As TSSA supplements its safety services with improved risk analytics, compliance support, an emphasis on reducing high risks and a focus on pursuing unlicensed devices and illegal workers, its current business model must change as well.”
Flat rates based on five-year historical averages
Ironically, the flat license rate will penalize most owners with extra costs if an elevator passes the periodic inspection and does not require a follow-up. Factoring in a follow-up inspection, there will be savings of varying amounts in low-rise, mid-rise and high-rise buildings.
In place of the previous basic split of elevators serving fewer than six or 6+ floors, the billing formula now has three categories of license costs:
- Elevators serving up to three floor at $250;
- Elevators serving four to 20 floors at $330; and
- Elevators serving 21+ floors at $400.
Based on license fees and an hourly inspection rate of $137 in place until April 30, 2021, annual license costs for elevators that pass first inspection would currently be $247 for an elevator serving up to 6 floors or $263 for an elevator serving 6+ floors.
As of May 1, the hourly rate for periodic inspections will rise to $140 — completing a phased three-year 7.7 per cent increase that bumped the rate up from $130/hour prior to August 2019 — while the minimum charge for a follow-up inspection that lasts no more than an hour jumps nearly 130 per cent to $315, with additional time billed at $210/hour. Thus, the flat license rate will be a bargain if just one follow-up inspection lasting no more than one hour is required.
“The new flat fees are based on a five-year historical average of inspection hours for each category of device, business or facility type,” the TSSA advises. “Additional fees will apply when customers require repeated follow-up inspections due to non-compliance.”
Building owners/managers with elevator license renewals due in early May should have already received invoices for the new flat rates since the TSSA has pledged to send them at least 60 days in advance. Information pertaining to the new rate structure is posted on the TSSA’s website, which also reports that customers have received two previous notices of the new billing model — via email on Nov. 20, 2020 and in a letter mailed out on Jan. 29, 2021.
“I don’t have an issue with this in principle, as long as we are getting value for the rate alignment that will be implemented,” reflects Randy Daiter, vice president, residential properties, with M&R Property Management. “It may prove beneficial for customers if there is less incentive for the TSSA to inspect sites on a fee-for-service basis, or if rates are scaled to apportion fees more equitability to smaller landlords, businesses and/or operators. However, we won’t really know the true impact of the new rate schedule until we look in our rear view mirror and are able to compare actual year-over-year costs.”
Reviewing and approving designs and commissioning
Flat rates will also be introduced for the various oversight services required when elevating devices are newly installed, extensively retrofitted or altered in more minor ways. As with license fees, these flat rates will bundle in the cost of an initial inspection and one subsequent inspection with the engineering services related to reviewing and approving plans and commissioning. In addition, the hourly rate for engineering services will rise from $143/hour to $146/hour on May 1, completing a three-year, phased 6.8 per cent increase from $136/hour prior to August 2019.
Of note, the new fee schedule simplifies engineering service rates to just two categories of elevators — elevators serving up to three floors, and elevators serving 4+ floors — in place of the current five different rates for initial inspections based on the elevator’s propulsion system. As with license inspection fees, the minimum cost of required subsequent inspections will jump from the current $137 to $315 for the first hour, with additional time billed at $210 per hour.
The TSSA estimates the new flat rate of $1,400 for elevators serving two to three floors will typically be higher than the total costs now charged for hydraulic or roped hydraulic elevators, but lower than total charges for traction elevators serving up to 15 floors. The new flat rate of $1,850 for elevators serving 4+ floors is estimated to be about 7 per cent higher than current total costs for traction elevators serving 16 to 30 floors and about 1.7 per cent lower than current total costs for traction elevators serving 31+ floors.
Meanwhile, engineering service costs for installing a lift for barrier-free access are projected to drop 29 per cent when the new flat rate goes into effect. Currently, the average total cost for engineering services and an initial inspection is pegged at about $990, while the new flat rate is $700.
Barbara Carss is editor-in-chief of Canadian Property Management.