Agenda Report
Fullerton City Council
MEETING DATE: MAY 16, 2023
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: RAUL GODINEZ, INTERIM PUBLIC workS DIRECTOR PREPARED BY: stephen bise, city engineer / ASSISTANT PUBLIC WORKS DIRECTOR Jerome Joaquin, Administrative manager
SUBJECT: NEW AND REVISED FEES FOR PUBLIC WORKS SERVICES – WATER UTILITY AND AIRPORT FEES
SUMMARY
Consideration of adding, increasing and/or modifying Water Utility and Airport fees for services provided by the Public Works Department in efforts to approach full cost recovery for services provided.
RECOMMENDATION
Provide direction regarding proposed changes to the Water Utility and Airport fees for services provided by the Public Works Department in efforts to approach full cost recovery, beginning Fiscal Year 2023-24.
CITY MANAGER REMARKS
The City Manager recommends that the City Council approve option 2 which would be a 3 year phase in of the fee increase.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statement:
Fiscal and Organizational Stability
FISCAL IMPACT
Water Utility Fees: Staff presents two options for City Council consideration, discussed in detail in this report. Both options would eventually result in full cost recovery for services rendered. The City expects to recover 50% additional revenue (approximately $500,000 to $600,000) at full cost recovery with approval of updated water utility fees.
Airport Fees: Staff projects an annual 10% increase in Hangar lease revenue (60% of total Airport revenue) and 36% increase in tie-down monthly lease revenue anticipated to result in additional $150,000 revenue. Staff discusses this in more detailed in the report.
DISCUSSION
Background
Government Code Section 66014 allows the City to recover the full cost of providing water utility related services. The City adopted resolutions establishing the current Public Works fees over several years. Staff reviewed fee increases over the past twenty-five years but could not find the last application of a full cost recovery method to the water utility-related fees. The City implemented minor updates, including introduction and/or removal of certain fees, within this twenty-five-year period. The City most recently adopted Resolution No. 2017-40 to increase Public Works fees, including the water utility fees, by 10% on June 6, 2017. The same resolution recommended adjusting fees to prevent the City from further subsidizing costs.
Cities adopt fees to recover the cost for services that provide a specific benefit to the person or entity receiving the service. The Government Code allows cities to set and control the amount of user fees charged to recover the cost of providing the service, to the extent that the fees do not exceed the reasonable cost for the City to provide the service. The user receives a subsidy, from water rate payers in this case, to the extent that cities do not require users to pay the full cost of the service they receive.
The City costs to provide services include the direct salary and benefits costs associated with providing the services (personnel costs) as well as other operational labor and materials costs associated with provision of the service (direct overhead). Cities may also recover indirect support costs relating to local government central service departments allocable to the city operating departments (e.g., human resources, finance, purchasing and liability insurance).
Fee Study Methodology
The Public Works Fee Study methodology mirrors the Fiscal Year 2020-2021Community and Economic Development Department study.
The Fee Study included the following tasks:
Review the existing Public Works fees and fee structure.
Review the direct and indirect cost of providing fee development services.
Ensure calculation of the total cost of providing each service at the appropriate activity level and in a manner consistent with all applicable laws, statutes, rules and regulations governing the collection of fees by public entities, including, but not limited to, Proposition 218 and Proposition 26.
Water Utility Fees and Revenue Analysis
The study for this fee schedule considered the various tasks and workflows associated with the services and applied applicable fully burdened hourly rates and time it takes to perform and deliver such services. This Fee Study determined the Water Fund heavily subsidized many common services in the Water Utility Fees in comparison to the full cost of the services.
The City absorbs approximately 50% of the cost to provide these Water Utility services to the City. Update to the Water Utility Fees would yield additional $600,000 annual water revenue at full cost recovery.
The following discusses two options for consideration. City Council may, at its discretion choose or modify either of these two options:
Option 1: Full Cost Recovery
This option generally proposes full cost recovery to provide the service. City Council approval would set the fees beginning with the start of Fiscal Year 2023-24. The City would consider adjustments for CPI and other budgeted increases on a recurring annual basis, beginning Fiscal Year 2024-25.
Option 2: Three Years to Implement Full Cost Recovery
This option generally eases the rate increases over three years to reach full cost recovery, splitting the increase to obtain full cost recovery over three years. However, this option proposes full cost recovery in the first year for new fees and reduction of existing fees. City Council approval would set the fees for Fiscal Years 2023-24 through and including Fiscal Years 2025-26. This option does not include adjustments for CPI and other budgeted increases beyond year one. Any supplemental increases in the second year and third year of this incremental fee increase would require City Council approval. New and restructured fees would take effect the start of FY 2023-24.
Airport Fees and Revenue Analysis
The City last updated Airport Hangar Lease Rates in 2019 while the City has not changed Tie-Downs Lease Rates and Fuel Flowage Fees in over ten years. Airport facility maintenance costs, with respect to labor and materials, have gradually increased with no added revenue to cover the cost differential. Staff takes an approach with the Airport to stay current with the market rate for these service making the Consumer Price Index (CPI) the driving factor for the increase. Staff determined Fullerton Airport fees lower than average upon surveying similar local general aviation airports. The proposed increases would place Fullerton in the median range with respect to other airports.
Staff requests increasing Hangar lease rates an average of 10%. Staff expects airport fund revenue to increate by 10% with Airport hangars 100% occupied. Staff proposes a 36.4% increase for tie-downs monthly lease rates a which also have a 100% occupancy rate. Fullerton Airport is the only general aviation airport in Orange County nestled in a prime location between Orange and Los Angeles County and adjacent to Interstate 5 and 91 Highway. The hangars and tie-downs have 100% occupancy with a two- to three-year waiting list.
Overall update to the Airport Fees will yield additional 7% of the total airport revenue if approved. This translates to approximately $150,000 additional annual Airport revenue.
Other City Fees Analysis
The following presents the results of a staff comparison of similar size cities within Los Angeles and Orange County to verify the range of fees.
Water:
Fullerton
Permit/Fee
Existing
Proposed
Orange
Garden Grove
Pomona
Water connection charge
$23
$73
$70
$50
$47
Fire Flow Test
$0
$143
N/A
$200
$285
1-inch Meter Test Deposit
$193
$303
$198
$348
N/A
Airport:
Fullerton
Fee
Existing
Proposed
Torrance
El Monte
Pacoima
Pomona
Standard Hangar (rate per square foot)
$0.396
$0.43
$0.67 Resident
$0.75 nonresident
$0.43
$0.43
$0.43
Tie-downs (per month)
$110
$150
$133
$104
$132
$84
Fuel Flowage (per gallon)
$0.11
$0.15
$0.15
$0.15
$0.15
$0.15
The comparison provides a means of identifying deficiencies in Fullerton fees. However, comparing fees with other cities proves challenging given the nature of each city with varying employee fully burdened rates, different cost recovery philosophies, the content of the fees, etc. These variations make direct comparisons problematic and a less reliable method to gauge for analysis purposes.
Attachment 2 provides a summary of fees with a significant discrepancy between the full City cost to provide the service versus the current fee charged by the City.
Attachments:
Attachment 1 – PowerPoint Presentation
Attachment 2 – Fee Analysis
cc: City Manager Eric J. Levitt
New and Revised Fees for Public Works Services – Water Utility and Airport Fees May 16, 2023 - Page 3