BACKGROUND:
This report presents the Schedule of User and Regulatory Fees intended for use in Fiscal Year 2023/2024.
On September 8, 2021, the City Council adopted an updated Schedule of User and Regulatory Fees based on the results of a comprehensive cost of service study. During interim years (i.e., during years in between comprehensive studies) the City Council has authorized inflationary adjustments to fees.
This year represents an interim year update, with updates primarily intended to apply the authorized inflationary adjustments and to incorporate feedback received subsequent to adoption of the City’s current schedule of fees.
User and regulatory fees are established by the City Council. The City’s fee schedule is a compilation of fees for City services provided to members of the public. The advantages of updating the City’s user and regulatory fees include assuring fees are set based on current costs and approved cost recovery objectives while providing transparency in the fee structure for the City’s development-related and other municipal fees.
The fee schedule identifies fees for services and activities provided at the request of, or on behalf of, a single party as opposed to the public at large. Examples of user and regulatory fees collected by Cathedral City and municipalities throughout California include, but are not limited to:
•Planning Fees, such as entitlement review and review for compliance with the zoning code
•Building Fees, such as permitting of new construction or modifications to existing structures
•Engineering Fees, such as map review, encroachment permitting, and public improvement review
•Fire Prevention Fees, such as fire sprinkler, fire alarm, and other permit review for compliance with Fire Code
•Police Fees, such as vehicle impound and false alarm response User and regulatory fees specifically exclude:
•Taxes
•Assessments
•Franchise Fees
•Development Impact Fees
•Fines or Penalties
•Utility Rates and Services Charges
Industry best practice and California statute are in harmony: User and regulatory fees should be set according to the estimated reasonable cost of service and should bear a fair and reasonable relationship to the payer’s burdens on, or benefits received from the activities and/or services provided by the City. Recovering the costs of providing fee- related services directly influences the City’s goal of maintaining fiscal stability while continuing to provide quality essential services.
Additionally, ongoing review and adjustment of fees provides multiple benefits, including:
•Increasing the availability of General Fund revenues to be used for services and activities available to all residents and businesses, such as public safety services.
•Keeping pace with general cost inflation.
•Avoiding fee spikes that are more likely to occur when municipalities leave fees unchanged for a multiyear period.
•Providing fee payers, city staff, and city policymakers with a pattern of consistency that provides information for forecasting and decision-making purposes.
•Helps meet fee-payer service level expectations by collecting fees to fund the existing level of services provided.
•Encouraging generational equity among fee payers by avoiding long-term stagnation of fees followed by significant fee increases.
DISCUSSION:
Staff plans to review the proposed updates to the City fees in the four attachments provided below to City fees with the goal to schedule a public hearing in a subsequent meeting to formally consider adjustments and refinements to the schedule of user and regulatory fees:
•Attachment 1 – this attachment is for informational purposes only. It identifies fees effective July 1, 2023, after applying the City Council’s directive to adjust fees annually based on the change in regional cost inflation or based on Council directed phase-in to full cost recovery for various fees. oDuring interim years (i.e., during years in between comprehensive fee studies) the City Council has authorized inflationary adjustments to fees.
The inflationary adjustments are based on the annual percentage change in the all-urban Consumer Price Index for Consumer Price Index All Urban Consumers, Riverside-San Bernardino-Ontario, CA (CPI). The most recent annual percentage change in CPI was 8.7%. Accordingly, most fees in the City’s fee schedule increased by 8.7% effective July 1, 2023. oIn addition to the CPI update, the City Council has authorized a multi-year phase-in approach to enhance cost recovery for several fees. The multi- year phase-in pattern is illustrated below:
▪Current fees at 85% cost recovery
▪Adjustment for FY 2023/2024 (this year): Adjust fees to 92.5% cost recovery
▪Adjustment for FY 2024/2025 (next year): Adjust fees to 100% cost recovery
•Attachment 2 – this attachment identifies non-inflationary adjustments to fees.
These adjustments are intended to refine the fee schedule to clarify applicable fees for service and annual inflationary adjustments. To more easily forecast applicable fees, identifying these fee categories in the City’s schedule will reduce variability in billings and allow applicants. These adjustments are intended to be considered by the City Council during a public hearing. •Attachment 3 – this attachment provides the cost-of-service analysis to support non-inflationary adjustments to City fees.
•Attachment 4 – this attachment provides a complete illustration of the fee schedule anticipated to be used during Fiscal Year 2023/2024 and published on the City’s website.
FISCAL IMPACT:
With the 8.7% compounded CPI increase, City license, permit, fee and service revenues could provide additional revenue up to $684,342 for fiscal year (FY) 2023/2024. Considering there are certain revenues not impacted by the CPI increase, a conservative estimate would be $400,000 (5%+ increase).
FIVE-YEAR STRATEGIC PLAN:
This action will further Goal C – Fiscal Stability and Sustainability Objective - Cathedral City has economically prospered by facilitating the investment of private dollars in high quality development which benefits the community. We remain financially solvent by instituting prudent fiscal policies and transparent financial practices.