CITY of
MERCED
User and Regulatory Fee Study
for Development Services Fees
City Council | April 6, 2026
Attachment 4
• Background
• Fundamentals and Terminology
• Study Findings and Recommendations
• Next Steps
MEETING AGENDA
2 CLEARSOURCE PRESENTATION TO THE CITY OF MERCED
Background
• Merced staff and contract service providers review
plans, issue permits, and perform required inspections
to ensure safe, orderly and aesthetically pleasing
development within the City.
• User/regulatory fees are the mechanism by which the
City may recoup a portion, or all, of the costs
associated with these services.
BACKGROUND
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• Communities generally use tax revenues to fund
services that provide general (community-wide)
benefit
• Public works
• Public safety
• Park maintenance
• Communities generally use fees and charges (direct
recovery) to fund services that provide direct benefit
• Plan Review
• Permitting
• Inspection
BACKGROUND
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• Building Fees - construction permit processing, plan check, and inspection
• Engineering and Public Works Fees - engineering review of development-related grading and public improvements; review of temporary encroachments in the City right-of-way • Planning Fees – Zoning and entitlement review and use permitting
• Fire Construction Review Fees – construction review for compliance with Fire Code
TYPES OF FEES EXAMINED
• This update DOES
NOT examine taxes,
assessments, utility
rates, or
development impact
fees
CLEARSOURCE PRESENTATION TO THE CITY OF MERCED6
Fundamentals and Terminology
• Legal requirements
• Encourage direct recovery of costs incurred
to serve private interests/benefit or respond
to individual actions
• Provide opportunity for relief to General
Fund or other Funds where costs are
incurred
• Enable continuity of service levels by
improving cost recovery levels
MUNICIPAL FEES
• Why do Cities
Review Fees and
Charge Fees for
Services?
CLEARSOURCE PRESENTATION TO THE CITY OF MERCED8
• Fees proposed are not taxes, as defined by
Article 13C of the California State Constitution
• Fees are set in accordance with parameters set
by Article 13C and by Section 66014 of the
California Government Code:
• Costs allocated to the payer should bear a fair or
reasonable relationship to the payer's burdens on or
benefits received from the governmental activity
• Fees should not exceed the reasonable cost of
providing the service for which the fee is charged
FEES ARE APPROVED BY THE CITY COUNCIL
The City Council has
authority to Directly
Approve User and
Regulatory Fees and
Increases to Fees
CLEARSOURCE PRESENTATION TO THE CITY OF MERCED9
• Full Cost of Service
• Cost Recovery
• Subsidy
TERMINOLOGY
These terms of art
have specific meaning
across California
municipalities and
within the City
CLEARSOURCE PRESENTATION TO THE CITY OF MERCED10
COST OF SERVICE
• The cost of service sets the
maximum limit of a cost-based
fee. It includes:
• Direct program costs for
labor, services, and supplies
• Departmental administration
• Citywide administration and
central support services
CLEARSOURCE PRESENTATION TO THE CITY OF MERCED11
100%
0%
Cost Recovery Targeted
Hourly
Rate for
Personnel
Providing
Services
Time
Required
to Perform
the
Service
Cost of
Servicex =
Fully Burdened
Hourly Rates:
• Direct and indirect
labor costs
• Services and supplies
• Agency overhead
Estimated or
Known Times for
Providing Services
Maximum
Fee
Amount
Exclusively individual benefit
Considerable individual benefit
Balanced individual and
community benefit
Considerable community benefit
Mostly community benefit
Entirely community-wide benefit
COST RECOVERY POLICY FRAMEWORK
Cost recovery
policy reflects
local values
regarding the
presumed
beneficiaries for
each program
area, ranging from
community
benefit to
individual
benefit
CLEARSOURCE PRESENTATION TO THE CITY OF MERCED12
100%
0%
Cost Recovery Targeted
SUBSIDY
• The amount of a
program’s full cost of
service that is
supported by other
City revenue sources
CLEARSOURCE PRESENTATION TO THE CITY OF MERCED13
100%
0%
Cost Recovery Targeted
Full Cost
of Service
($)
Revenue
from
Current
Fee ($)
City Subsidy
Maximum Level of
Cost Recovery =
100%
Current Level of
Cost Recovery =
X%
Minimum Level of
Cost Recovery =
0%
Study Findings and Recommendations
• Enhanced cost recovery is recommended
• Fees are primarily regulatory
• High level of direct benefit resulting from construction activities including enjoyment of property
enhancements, and increased property values
• Avoid having other Merced residents and businesses
subsidize individual private construction activities
FINDINGS AND RECOMMENDATIONS
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REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
$103
$109
$138
$146
$152
$184
$196
$215
$242
$280
$353
$433
$0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500
FRESNO
LODI
MERCED - CURRENT
MADERA (FEE STUDY IN-PROGRESS)
DAVIS
TRACY
MANTECA
MERCED - PROPOSED
MODESTO
CHICO
FOLSOM
SAN LUIS OBISPO
Electric Service Panel Upgrade - Residential
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
20 CLEARSOURCE PRESENTATION TO THE CITY OF MERCED
* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
23 CLEARSOURCE PRESENTATION TO THE CITY OF MERCED
* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
24 CLEARSOURCE PRESENTATION TO THE CITY OF MERCED
* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
REGIONAL FEE COMPARISON
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* Information included is for illustrative purposes only. Figures are not intended to be exact. Amounts shown are based on consultant interpretation of agency fee schedules. Some amounts may be T&M deposits.
Fiscal Impact of Proposed Changes
• Anticipated fiscal impact is $1.15M in additional
annual cost recovery.
• Additional revenue is intended to offset the costs
of existing direct services.
FISCAL IMPACT
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Next Steps
Complete Public Hearing
and Formally Consider Fee Adjustments
Staff Recommendation: Adopt Updated
Schedule of User and Regulatory Fees for Various
Services
NEXT STEPS
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Questions or Feedback