RESOLUTION NO. 24-041
A RESOLUTION OF THE CUPERTINO CITY COUNCIL ADOPTING
USER FEECOST RECOVERY POLICY
WHEREAS, the Cupertino City Council has identified a need to adopt a policy governing general guidelines for establishing and maintaining a comprehensive user fee schedule to ensure the City adequately recovers costsfor the provision of services, benefits, or privileges (Services) in an efficient, legal, and accountablemanner; and
WHEREAS, on May 14, 2024, the City Council considered proposed policy at a duly noticed special meeting of the City Council.
NOW, THEREFORE, BEIT RESOLVEDthat:
1. The City Council hereby adopts the User FeeCost RecoveryPolicy attached hereto asExhibit A. The Policy shall be effective on July 14, 2024.
PASSEDAND ADOPTED at a special meeting of the City Council of the City of Cupertino this 14thday of May, 2024, by the following vote:
Members of the City Council
AYES: Mohan, Fruen, Chao, Moore, Wei
NOES: None
ABSENT: None
ABSTAIN: None
SIGNED:
Sheila Mohan, Mayor
City of Cupertino
Date
ATTEST:
Kirsten Squarcia, City Clerk Date
6/3/24
6/3/24
USERFEECOST
RECOVERYPOLICY
Citywide Policy Manual
Attachments: N/ A
EffectiveDate:
July 14, 2024 per Resolution 24-041
ResponsibleDepartment:
Administrative Services
Related Policies & Notes:
Purpose
To provide general guidelines for establishing and maintaining a comprehensive user fee scheduleto ensurethe City adequatelyrecoverscostsfor the provision of services, benefits, or privileges (Services) in anefficient, legal, andaccountablemanner.
Background
TheCity conductscomprehensiveCostAllocation Plans (CAP) andFeeStudieson a seven-year cycle to assessthe alignment of current feeswith the actual cost of providing eachservice. CAP establishesa data-driven methodology for distributing administrative and overhead chargesto programs and services, while a FeeStudy determines the full cost of servicesfor which feesare charged. Themost recentstudy, presentedduring the February6,2024, City Council Meeting, recommendedthe adoptionof a formal costrecoverypolicy acrossall servicesectors, including General, Engineering, Building, Planning, and Parksand Recreation. TheCAP and FeeStudy guided the crafting of the policy by City staff, aligning closely with Council directives and recommendations.
BetweenCAP and feestudies, the City adjustsfeeschedulesannually to reflectchangesin the ConsumerPriceIndex (CPI), theBayAreaConstructionCostIndex (CCI), or changesin budgeted laborcosts. Theseadjustmentsrequireannualreviewandapprovalby theCity Councilto ensure fees accurately reflect current service costs, accommodate new City services, and eliminate fees for discontinued services.
Policy
The policy hasthree main components:
Provisionfor ongoingreview
Processof establishingcostrecoverylevels
o Factorsto beConsidered
TargetCostRecoveryLevels
o General ranges
o Targetcostrecoveryby servicearea
Attachment A
Provision for ongoing review
Feeswill undergoannualreviewsto ensuretheyremainalignedwith changesin thecostof living and evolving methodsor levelsof servicedelivery. To facilitatean evidence-basedapproachto this review process, the City will conduct a CAP and FeeStudy every seven years. During the interim periods, feeadjustments will bemade basedon annual costfactors, such asthe Consumer Price Index ( CPI), the Bay Area Construction Cost Index ( CCI), or changes in budgeted labor costs.
Furthermore, shouldasignificantfeeincreasebewarrantedafterthecompletionof thestudy, the fee structure may be phased in over a period of 2-3 years to reach the desired cost recovery rate.
This proactive approach ensuresthat our feestructures remain fair, transparent, and reflective of currenteconomicconditionsandservicestandards.
Processof establishinguserfeecostrecoverylevels
The following factors will be considered when setting service feesand cost recovery levels:
1. Community-wide vs. privatebenefit
a. The use of general purpose revenue is appropriate for community- wide services while user fees are appropriate for services that are of private benefit to individuals or groups. Full cost recovery is not always appropriate.
2. Servicerecipient vs. service driver
a. Particularly for servicesassociatedwith regulated activities (development review, code enforcement), from which the community eventually benefits, cost recovery from the "driver" of the need for the service (applicant, violator) is appropriate.
3. Consistency with City public policies and objectives a. City policies and Council goalsfocused on long-term improvements to community quality of life may also impact desired fee levels, as fees can be used to change community behaviors, promote certain activities, or provide funding for the pursuit of specific community goals, for example, health and safety, environmental stewardship.
4. Impact on demand (elasticity)
a. Pricing of services can significantly impact demand. At full cost recovery, for example, the City is providing services for which there is a genuine market not over-stimulated by artificially low prices. Conversely, high-cost recovery may negatively impact lower- income groups, and this can work against public policy outcomes, especiallyif the servicesare specificallydesignedto serveparticular groups.
5. DiscountedRatesandSurcharges
a. Ratesmay be discountedto accommodatelower incomegroupsor groupswho arethetargetof theservice, suchasseniorcitizensor residents. b. Higher rates are considered appropriate for non-residents to further reduce general fund subsidization of services.
Attachment A
6. Feasibility of Collection
a. It may be impractical or too costly to establish a system to appropriately identify and charge each user for the specific services received. The method of assessing and collecting fees should be as simple as possible in order to reduce the administrative cost of collection.
Target cost recovery levels
1. Low- cost recovery levels (0% - 30%) are appropriate if:
a. There is no intended relationship between the amount paid and the benefit received
b. Collecting feesis not cost-effective
c. There is no intent to limit the use of the service
d. The service is non-recurring
e. Collecting feeswould discourage compliance with regulatory requirements f. Thepublic at largebenefitsevenif theyarenot thedirectusersof theservice
2. Serviceshaving factors associatedwith both cost recovery levels would be subsidized at a mid- level of cost recovery (31% - 80%).
3. High- cost recovery levels (81% - 100%) are appropriate if:
a. The individual user or participant receivesthe benefit of the service b. Other private or public sectoralternatives could or do provide the service c. For equity or demandmanagementpurposes, it is intendedthat therebea direct relationship betweenthe amount paid and the level and cost of the service received
d. Theuseof theserviceis specificallydiscouraged
e. The service is regulatory in nature
Schedule/Service Area TargetCost Recovery Range
ScheduleA – General 100%
ScheduleB – Engineering (PW) 75-100%
ScheduleC – Building 80-100%
ScheduleD – Planning 50-80%
ScheduleE – Recreation* Market- driven
Parksand RecreationFeesexclusion – feeswill beadministrativelyupdatedper ResolutionsNo. 04- 350, authorizingtheCity Managerto setall recreationfees.
Revisions:
Attachment A