EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: April 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Greg Henry, Senior Management Analyst
Greg Henry, Senior Management Analyst
SUBJECT: Comprehensive Fee Schedule Update
Recommendation
Adopt a Resolution adopting the Comprehensive Fee Schedule to become effective July 1, 2023.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 2: Enhance Economic Vitality
Priority No. 3: Increase Organizational Effectiveness and Efficiency Priority No. 5: Improve Communication and Enhance Community Engagement Background
Cities collect user and regulatory fees and charges at rates generally intended to recover costs associated with the related City services and oversight, including building, planning, public works, regulatory oversight, and community and administrative services. The City’s Comprehensive Fee Schedule discloses fees charged for the following purposes:
User/Regulatory Fees. These fees are charged by the City to the public for a service-related or regulated activity. User-fees are developed for specified services provided or required due to the request or action of an individual/entity, while regulatory fees are those charged to recover costs associated with the City’s power to govern certain activities, such as building code or environmental compliance.
User and regulatory fees for services and activities are imposed by California municipalities through provisions of the State Constitution. Cities may perform broad activities related to local policing power and other service authority as defined in California Constitution Article XI, Sections 7 and 9. Cities also establish fees for service through the framework defined in Article XIIIC, Section 1. Under Article XIIIC, §1 fees for service may not exceed the estimated, reasonable cost of providing the service or performing the activity. Fees must relate to a service or activity under the control of the individual/entity on which the fee is imposed.
Development Impact Fees. These fees are collected by the City to fund capital infrastructure project costs attributable development impacts. These development impact fees are typically due at the time of building permit issuance.
The purpose of these fees is to defray all or a portion of the cost of public facilities related to the development project. The legal requirements for enactment of an impact fee program are set forth in Government Code Sections §66000 - 66025 (the "Mitigation Fee Act"). The Mitigation Fee Act is commonly referred as “AB 1600”.
Primarily, a local government bears the burden of proving that a levy, charge, or other fee is not a tax, and that the amount is no more than necessary to cover the reasonable costs of the governmental activity.
In July 2020, the City Council adopted Resolution No. 108-2020 adopting the first major revision of the City’s Comprehensive Fee Schedule, effective September 20,2020. The Fee Schedule was first adopted in 2012 with minor amendments, including periodic adjustments for inflation, and minor changes to parks, recreation, and housing fees.
Development impact fees are studied and adopted separately from user and regulatory fees and are generally amended annually by the change in a “construction cost index” or CCI.
On April 20, 2021, the City Council passed Resolution No. 60-2021 revising the City’s Comprehensive Fee Schedule, effective July 1, 2021. This update was mostly to adjust for inflation.
Similarly, on April 19, 2022, the City Council passed Resolution No. 48-2022 revising the City’s Comprehensive Fee Schedule, effective July 1, 2022. This update was mostly to adjust for inflation.
Analysis
User and Regulatory Fee Update
Independent fee studies are costly and time-consuming. In the interim periods between comprehensive studies, staff recommends the City review and compare regional price change indicators (i.e., consumer price index) to relevant General Fund cost changes to support cost updates and changes in user and regulatory fees on an annual basis.
Given that the City has actually seen inflationary cost increases, including staffing costs, staff recommends the San Francisco-Oakland-Hayward CA, CPI-U twelve-month as the regional price change indicator. The February 2023, San Francisco-Oakland-Hayward CA, CPI-U is
5.3%, and staff is recommending the Council increase most user and regulatory fees by this amount, with the following fees excepted:
• Photocopy Fees
• Ellis Act Withdrawn Property Administrative Fee
• Returned Check Fees
• Overdue Invoice Fee
• Business License – First Time Application Fee
• Repossession Verification Fee
• Proof of Correction Citation
• Clearance Letter
Changes
The Planning Division is requesting a minor name change. The fee previously listed under Section 9-Use Permit named “Use Permits” has been updated to “Conditional Use Permit (COP)”.
The Community Services Division is requesting an update to the facility rental fees. This change will differentiate fees for residents and non-residents of East Palo Alto. This fee structure is similar to neighboring municipalities. Currently, the City of East Palo Alto has some of the least expensive facility rentals in the region as a benefit to its hardworking residents who have faced structural inequalities for decades. As a result, for residents of neighboring municipalities, facilities in East Palo Alto are substantially less expensive than renting their own municipal facilities. This has caused an increase in non-residents renting East Palo Alto facilities, sometimes preventing our own residents’ access.
To ensure that residents have priority to these locations and align rental costs of East Palo Alto facilities with those of our neighbors for non-residents, the city seeks to update to a fee structure model to differentiate between residents and non-residents. Specifically, staff look to bring the hourly rate of Cooley Landing closer to the rate of comparable rentals on the Peninsula (similar facilities rent for $185 resident / $265 non-resident).
For the YMCA City Room and the Community Room, staff are proposing an hourly rate of $40 for non-residents. With the CPI increase, the hourly rate for residents will be $17. For Cooley Landing, staff are proposing an hourly rate of $150 for non-residents. With the CPI increase, the hourly rate for residents will be $85.
At the time of the fee study, the cost recovery for facility rentals was calculated to be only 4%.
Thus, there is sufficient cost justification for the proposed increase for non-residents.
Development Impact Fees Update
In accordance with authorizing resolutions and ordinances for the development impact fees listed in the table below, staff is proposing an annual cost change to update impact fees based upon the reference price index indicator – in this case the Construction Cost Index (CCI). The impact fees, as increased by current year CCI, are incorporated as a separate chapter of the City Comprehensive Fee Schedule.
The following table summarizes the prior increases to Development Impact Fees:
Resolution Approval Date Percent Increase
108-2020 July 30, 2020 1.6%
60-2021 April 30, 2021 3.1%
48-2022 April 19, 2022 8.9%
Staff recommends a 3.0% increase for FY 2023-24 in accordance with the March 2023 CCI published by Engineering News Record. The following table reflects the referenced authorizing code and resolutions:
Fee Type
Authorizing
Municipal
Code
Authorizing Fee
Setting and
Annual Increase
Parks & Trails
13.28.040 Reso - 5093 &
MC – 13 .28.100
Public Facilities
Storm Drainage:
Inside Ravenswood Business District
Outside Ravenswood Business District
Transportation
Water Capacity 13.24.100 Reso – 5004
Affordable Housing Commercial Linkage 18.40.010 Reso – 118-2020 Fiscal Impact
User and service fee revenues are expected to increase 5.3% per activity across most divisions and programs. Impact fees will increase 3.0%, if collected.
Public Notice
The public was provided notice of this agenda item by publishing a notice of the hearing dates in the “San Mato County News” on April 4th, 8th and April 13th, sending notice to the Building Industry Association, and posting the proposed Comprehensive Fee Schedule update on the City website.
Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.
Attachments
1. Resolution Comphesnvie Fee Schedule Update
2. Exhibit A East Palo Alto Master Fee Schedule Eff 07.01.2023