RESOLUTION NO. 2023-082
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, ADOPTING A CITY COUNCIL POLICY FOR COST RECOVERY WHEREAS, the City Council of the City of Carlsbad, California has the authority to establish fees for city services; and
WHEREAS, the City Council finds it necessary to recover the costs of city services; and WHEREAS, the City Council believes that each city service provides varying benefits to individuals, business and community groups and warrants particular cost recovery structures based on the types of benefits conferred by each service; and
WHEREAS, the City Council desires to implement a cost recovery policy in order to establish a set of guidelines for target cost recovery ratios for each category of services for which the city charges a fee; and
WHEREAS, the City Council wishes to outline a set of procedures for the periodic evaluation of city fees and cost recovery levels; and
WHEREAS, the cost recovery policy is applicable to all entities for which the City Council acts as the legislative body upon adoption of the policy by those entities.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. That the City Council adopts the new City Council Policy titled Cost Recovery Policy as shown in Attachment A.
PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the City Council of the City of Carlsbad, the Community Development Commission of the City of Carlsbad, and the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad, California on the 14th day of March, 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Luna.
None.
None.
None.
KEITH BLACKBURN, Mayor
SHERRY FREISINGER, City Clerk
{SEAL)
City Council
POLICY STATEMENT
Policy No.
Date Issued
95 March 14, 2023
Resolution No. 2023-082
Subject: Cost Recovery Policy for Fees and Charges for Services Purpose
It is important for the city to have a sound and consistent cost recovery policy that will serve as a management tool for establishing, implementing, and evaluating fees and charges.1 This policy ensures that the city's fees and charges are managed in a manner that will:
• Provide for the delivery of quality services
• Maintain and enhance service delivery
• Support a balanced budget through evaluation and review of the city's total estimated and reasonable cost of providing services
• Set fee amounts in accordance with local goals as pertains to code compliance, cost recovery, economic development, and community values
• Ensure that any action to establish, increase, or impose a fee is conducted in a manner that satisfies the requirements of state law
The City of Carlsbad is authorized to adopt and implement fees and charges for certain municipal
services, provided the fees and charges do not exceed the reasonable cost of providing such services. This policy sets forth cost recovery targets, timelines for fee increases, annual cost inflation adjustments, and frequency of comprehensive review for all city fees and charges.
Background
The city's fees for services, products, and regulatory activities are not taxes requiring voter approval under California State Constitution, Article XIII C, Section 1 (a voter initiative added by Proposition 218 and amended by Proposition 26) if the fees do not exceed the reasonable cost of the services, products or regulatory activities. In addition to the Constitution, state and local laws also provide authorization to charge fees for services. For example, Government Code 66014 governs many fees as it pertains to development approvals. The language of Government Code 66014 mirrors the reasonable cost limitation expressed by the Constitution.
This policy addresses all city fees and charges included in the city's Master Fee Schedule, with a few exceptions. Fees for services not subject to this policy typically require different analyses and adoption processes than the fees that are subject to this policy. 1 The policy, as it applies to Carlsbad Municipal Water District fees and housing services fees, was approved by the Board of Directors of Carlsbad Municipal Water District of the City of Carlsbad on [date) by Resolution No. [number] and the Community Development Commission on [date] by Resolution No. [number].
Attachment A
City Council Policy Statement
March 14, 2023
Subject to this Policy Not Subject to this Policy
• Miscellaneous administrative fees
• Special events fees
• Streetlight energizing fees
• City Clerk’s Office fees
• Library fees
• Fire fees:
o Fire extinguishing and alarm
systems permit fees
o Annual inspections and fire
code permits
o Other fire fees
• Fees for development applications,
including entitlements, plan review,
permit issuance, inspections
• Police administrative and service fees
• Utility account and service fees
• Utility meter installation fees
• Fees charged on an hourly, time and
materials, or actual cost of service
basis
• Permit fees required to operate a
business
• Any fees prohibited by law from
exceeding the reasonable cost of
providing services
• Deposits and securities
• Safety Training Center facility fees
• All fees for rental or use of city
facilities and/or equipment
• Administrative citation penalties
• Vehicle, traffic and parking civil
penalties
• Development impact fees, utility
connection fees
• Trash collection rates
• Fees set through contracts with
third-party vendors
• Water and wastewater service rates
and property related fees and taxes
governed by Proposition 218
• Fees set by external agencies
• Other monetary exactions imposed
on a project on an ad hoc basis in
connection with the approval of a
development project
• Business license taxes
• Emergency medical services,
paramedic and ambulance fees
• Parks & Recreation and Library &
Cultural Arts program and class fees
2 • All fees for services set by state or
federal statute
St
atement of policy
It is the policy of the City of Carlsbad that the following guidelines will be used in establishing and maintaining fees and charges:
1. Revenues for individual fees and in aggregate for any fee program shall not exceed the reasonable cost of providing services.
2. Comprehensive review of all city fees and charges shall occur every five to seven years. 2 Resolutions No. 2008-192 and No. 2015-173 authorized the City Manager or a designee to set all fees included in the Community Services Guide provided that fees both do not exceed the cost of providing the program and that these fees are no lower than the lowest fee charged for similar programs in the cities of Oceanside, Vista, San Marcos, Escondido, or Encinitas.
City Council Policy Statement
March 14, 2023
3. In certain circumstances where cost recovery may be unrealistic or undesirable, the City Council may subsidize a portion of or an entire fee program and/or individual fees.
4. In certain circumstances where immediate adjustments to full cost recovery may be impractical, it may be appropriate to phase in fee increases over multiple years.
5. The procedures for adopting fees for development applications or projects shall follow the procedures for adopting various fees provided by Government Code sections 66016- 66019, or other applicable law, and shall be effective no sooner than 60 days following the final action.
6. Fees and charges should be sensitive to the “market” for similar services.
7. A unified approach should be used in determining cost recovery levels for various programs and their individual fees and charges based on this policy.
Inf
luential Factors to Cost Recovery Policy
Reasonable, routinely reviewed, and well managed fees for services are one of the many responsible financial steps needed to support the c ity’s overall financial sustainability . When considering whether fees and charges should be adopted to recover 100% of the costs of providing services, city staff and the City Council will consider the following influential factors:
• The level of cost recovery should consider the degree to which the public benefits from the service versus the degree to which the user of the service themselves benefits. • The level of cost recovery should consider how the pricing of services can affect the demand and subsequent level of services provided.
B
ased on the consideration of factors that influence cost recovery policy, the degree to which pricing for services recovers the city’s costs of providing the service will vary. • Low-level cost recovery services should aim to recover between 0%-30% of their costs.
These include services where there is no intended relationship between the fee and the benefit received, that are essential to community safety, or for services where collecting fees would discourage compliance.
• Mid-level cost recovery services should aim to recover between 31%-80% of their costs.
These include services where the specific user of the service receives a higher level of benefit than the general taxpayer, but where the city has an interest in encouraging compliance by subsidizing the cost of the service.
• High-level cost recovery services should recover between 81%-100% of their costs.
These include services where the individual primarily and directly benefits from the service, not the community at large. These may be services that could otherwise be provided by the private sector or use of the service is not encouraged.
City Council Policy Statement
March 14, 2023
Service/Program Cost Recovery
Target
Pricing Strategy
General and Administrative Fees – Finance, Clerk, City Manager Appeals to City Council MID (31%-80%) Both individual and community benefit from
the service
Business license master list of new/active
licenses
HIGH (81%-100%) Individual benefit received
from the service
Community facilities district annexation
services
HIGH (81%-100%) Individual benefit received
from the service
Miscellaneous services where amount of the
fee is not set by state or federal statute
HIGH (81%-100%) Individual benefit received
from the service
Special Events Fees
City-sponsored special events. Special events
sponsored by the city or a non-profit
organization with a community-wide benefit
that are free and open to the public
LOW (0%-30%) Community primarily
benefits from the service
Special events that are open to the public
where admission or fees for participation
are not charged
MID (31%-80%) Both the event sponsor
and the community benefit
from the service
Special events where admission is ticketed
or fees for participation are charged
HIGH (81%-100%) Individual benefit received
from the service
Library Fees
Library card replacement, hold requests,
interlibrary loans, general day-to-day service
fees
LOW (0%-30%) Community primarily
benefits from the service
Refund processing initiated by customer LOW (0%-30%) Community primarily benefits from the service
Fire Fees
Fire code permits, annual occupancy
regulatory inspections (both state-mandated
and non-mandated)
MID (31%-80%) Both individual and
community benefit from
the service
Fire/life safety plan check and inspection
fees for development services (e.g.,
sprinkler, alarms, new construction)
MID (31%-80%) Individual benefit received
from the service. Fees
should generally be set at
the higher end of the mid-
range
City Council Policy Statement
March 14, 2023
Police Fees
Patrol and general enforcement services MID (31%-80%) Community primarily benefits from the service
Copies of reports for victims of crimes MID (31%-80%) Ensure access to valuable service
All fees for records management, towing, or
other items which are not limited per state
or federal statute
MID (31%-80%) Individual benefit received
from the service, or fee is
administrative as pertains
to a violation of code/law
Utility Administrative Fees
New account set up, reinstating of service
for delinquent accounts to the extent not
limited by SB 998, meter installation, all
other fees for services
MID (31%-80%) Individual benefit received
from the service
Land Development Permitting & Inspection Services
Discretionary Entitlement Permit (review
and processing, including but not limited to
general plan amendment, rezone, local
coastal plan amendment, conditional use
permit, coastal development permit, site
development plan)
HIGH (81%-100%)
Individual directly
benefiting from the
permitted action pays a
majority, if not all the
permit processing costs
Minor Discretionary Permit (review and
processing, including but not limited to
permits that are more administrative in
nature (i.e., accessory dwelling units)
LOW (0%-30%)
Ensure compliance with
essential regulatory codes
and standards by
minimizing the permit
application costs
Ministerial Permit (review and processing,
including but not limited to building,
grading, map, and improvement plan)
HIGH (81%-100%)
Individual directly
benefiting from the
permitted action pays a
majority, if not all the
permit processing costs
Minor Ministerial Permit (review and
processing, including but not limited to
minor commercial or industrial tenant
improvements, adjustment plats, right-of-
way use or encroachment agreements)
MID (31%-80%)
Ensure compliance with
essential regulatory codes
and standards by
minimizing the permit
application costs
City Council Policy Statement
March 14, 2023
Administrative Ministerial Permit (review
and processing, including but not limited to
minor and/or routine residential repairs
LOW (0%-30%)
Ensure compliance with
essential regulatory codes
and standards by
minimizing the permit
application costs
Permit Inspection Services HIGH (81%-100%)
Individual directly
benefiting from the
permitted action pays a
majority, if not all the
permit processing costs
P
rocedures
This Cost Recovery Policy establishes a scheduled program to comprehensively review the fee schedule to determine if the current fee amounts are reflective of the costs to provide such services and are consistent with best practices and statutory requirements. • A comprehensive analysis of city service delivery costs associated with fees and charges shall be made approximately every five to seven years.
• Off-cycle updates will occur annually, where fees will be adjusted by a percentage equal to the change in the San Diego Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics or another reasonable inflationary factor. • Individual fees may be adjusted during the interim period based on supplemental analysis whenever there have been significant changes in costs. • The City Council shall have the opportunity to review and the authority to approve any changes to the Master Fee Schedule.
• The City Council may decide to increase fees over a period not to exceed three years in certain circumstances where immediate adjustments to targeted cost recovery amounts may be unrealistic.
C
omparability with Other Communities
Comparing the city’s fees to other communities provides useful background information in setting fees. It allows the city to assess the market price of the service as compared to other agencies as well as to learn about alternative methods of charging fees for certain services.
However, fee surveys should never be the sole or primary criteria in setting city fees as there are many factors that affect how and why other communities have set their fees at their levels.
T
erms and Limitations
1. All rights and obligations existing under any user fee schedule in effect prior to the effective date of a resolution approving a user fee update, shall continue in full force and effect. Updates to user fee schedules should not affect or disrupt the continuity of the city’s business or administration of its law, including:
• Actions and proceedings that began before the effective date of the resolution.
City Council Policy Statement
March 14, 2023
• Prosecution for ordinance violations committed before the effective date of the resolution.
• The amount, or collection, of license, fee, penalty debt, forfeiture, or obligations due and unpaid as of the effective date of the resolution.
2. This Cost Recovery Policy does not invalidate any action taken prior to its effective date if the action was proper under the law governing the action at the time the action was taken.