April 23, 2024
Agenda Item No. 14
TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
Jason Al-Imam, Finance Director/Treasurer - 949-644-3126, [email protected] PREPARED BY:
Abigail Marin, Budget Analyst - 949-644-3042,
[email protected]
TITLE:
Ordinance Nos. 2024-12 and 2024-13, and Resolution No. 2024-29: Revising Certain Fees Within the Schedule of Rents, Fines and Fees, Authorizing the Waiver of Vehicle Tow Fees, Adopting a Credit Card Convenience Fee, and Updating the Methodology for Annual Consumer Price Index Calculations ABSTRACT:
Consistent with best practices and City Council policy, the City of Newport Beach performs an annual study of user fees and charges to ensure that fees and charges do not exceed the cost of providing services. The study focuses on specific departments on a rotating basis so each department is reviewed every three to five years. During Fiscal Year 2023-24, the City of Newport Beach engaged a consultant, ClearSource Financial Consulting (ClearSource), to update the fees in the Finance, Harbor, Public Works, and Utilities Departments, following a cost recovery analysis. Staff also identified other fee updates outside of the studied departments. In addition to the proposed fee updates, staff is recommending modifications to Newport Beach Municipal Code (NBMC) Sections 3.36.030 (Cost Recovery Percentages) to facilitate the changes to authorized levels of cost recovery required by the fee changes that are recommended at this time. Modifications to NBMC Section 15.02.085 (Addition of Section 105.3.1.1) are also recommended to modify language pertaining to demolition permits in the Public Works Department.
RECOMMENDATIONS:
Conduct a public hearing;
Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; Adopt Resolution No. 2024-29, A Resolution of the City of Newport Beach, California, Revising and Adopting Fees Within the Schedule of Rents, Fine and Fees, Including the Credit Card Convenience Fee, Waste Disposal Deposits for Constructions Projects, Authorizing the Waiver of Vehicle Tow Fees, and Updating the Methodology for Annual Consumer Price Index Calculations; Calculations; Waive full reading, direct the City Clerk to read by title only, introduce Ordinance No. 2024-12, An Ordinance of the City Council of the City of Newport Beach, California, Amending Section 3.36.030 of the Newport Beach Municipal Code Related to Cost Recovery Percentages, and pass to second reading on May 14, 2024; and Waive full reading, direct the City Clerk to read by title only, introduce Ordinance No. 2024-13, An Ordinance of the City Council of the City of Newport Beach, California, Amending Section 15.02.085 (Addition of Section 105.3.1.1) of the Newport Beach Municipal Code Related to Demolition Waste Disposal, and pass to second reading on May 14, 2024.
DISCUSSION:
NBMC Section 3.36, and Council Policy F-4 (Revenue Measures) provide staff and the City Council with policy guidance related to setting cost recovery targets and updating user fees. User fees, or cost-of-service fees, are charged to a citizen or group for services performed or provided by a government agency on their behalf. If the service primarily benefits an individual or group of people, then the burden of that cost should be borne by the person receiving the benefit. NBMC Section 3.36.030 sets the cost recovery for user fees at 100%, apart from the subsidized fees listed in Exhibit “A” of that same section, as well as those limited by California or federal statutes. A recommendation for less than a 100% cost recovery rate may occur when a service is beneficial to the community at large along with specific individuals or groups, and/or when there is an economic incentive, or disincentive, to do so. In these cases, another City of Newport Beach revenue source – in most cases, the General Fund - subsidizes the service. Any newly proposed fee or fee increase that is not approved by the City Council will by default be subsidized by the General Fund.
The Schedule of Rents, Fines and Fees (SRFF) primarily includes cost-of-services fees, which are designed to recover the City’s cost to provide the related service. To establish fees based on full cost recovery, it is necessary to determine the cost of services. Using well-established cost accounting methodologies, the City’s consultant, ClearSource Financial Consulting (ClearSource), conducts a comprehensive review and update of the Citywide cost allocation plan, and direct user fee calculations for each department on a rotating basis every three to five years. This year, ClearSource studied the following departments at staff’s direction:
Finance
Harbor
Public Works
Utilities
As part of this study, ClearSource met with staff from each studied department to discuss the services provided, the annual volume for those services, and the staff resources and time estimates for delivering the related services. To factor in both direct and indirect costs, ClearSource then calculated the department staff’s fully burdened hourly rate, which includes both internal administrative as well as Citywide overhead costs.
The fully burdened hourly rates are applied to the time estimates provided by staff and the fee is calculated. Based on the results of the fee study, it is not uncommon for some fees to increase while others may decrease. The most common reasons for fees to go up or down are: 1) costs changing over time, most often increasing 2) the staff performing the service changes, and/or 3) the amount of time to perform the service changes. The proposed fees based on the fee study for the studied departments are detailed in Attachment A.
In addition to the City’s cost-of-service fees, the SRFF includes rents, fines & penalties, and other charges imposed by the City or mandated by the State of California. The amount of these charges is determined in a variety of ways, most commonly market surveys when not mandated by a higher level of government. Where changes are recommended for these non-cost-service components of the SRFF herein, a description of the fee methodology and reason(s) for a recommended change are provided.
On March 12, 2024, staff presented the fee study updates to the Finance Committee for consideration. The Finance Committee recommended that the fee updates as presented move forward for City Council consideration.
In addition to the studied department changes, ClearSource was also tasked with reviewing, revamping and consolidating the presentation of the SRFF to facilitate ease of viewing and referencing of rents, fines, and fees. This update has been reflected in the proposed SRFF that is included within Exhibit 1 of the proposed resolution, which is reflected in Attachment B.
The remainder of this report focuses on how studied fees are changing.
Finance Department
The Revenue Division of the Finance Department maximizes and safeguards the City’s revenues by implementing and enforcing Municipal Code revenue programs. These programs include, but are not limited to, tax collection, short term lodging, film permitting and parking. The Revenue Division was last studied in FY 2020-21.
Many of the Finance Department fees have proposed significant decreases due to the improved system processes including the implementation of revised forms in the Revenue Division that have allowed for a more streamlined and efficient cycle processing time. Notable decreases include the Business License Initial Application (in person), Sidewalk Vending Permit Application, and Sound Amplification permit. On the other side, Short-term Lodging Permits have seen an increase in Initial and Renewal proposed fees as staff time involvement with code enforcement regulation from the Community Development Department is factored into the model. Staff is proposing a phased in approach to full cost recovery over a two-year period to mitigate the impact of the increase in Short-term Lodging Permit fees to the customer.
In this department, two new fees are proposed:
Business License Initial Application (online) – The Revenue Division of the Finance Department currently provides review of online Business License Initial Applications at no cost. Initially, a no cost structure was provided to incentivize individuals to utilize the City’s online portal to streamline the application process, despite staff time involvement. The proposed fee of $6 would allow cost recovery for staff time involved with the review and processing of online applications.
Taxicab Operator License Fee – This fee is being proposed as the Orange County Taxi Administration Program (OCTAP), which regulated taxi operations on behalf of participating Orange County cities through a centralized permitting of cab companies, drivers, and vehicles, dissolved on December 31, 2020. The City of Newport Beach will be taking over the processes that OCTAP provided and will perform the regulatory functions within the city. Three fees associated with Taxicab permitting are proposed: a Company Permit fee of $1,660, a Vehicle Permit (per vehicle) fee of $1,399, and a Driver Permit fee of $1,660.
The proposed Finance Department fees would have an overall fiscal impact of $171,000 in increased estimated revenues, with much of the fiscal impact associated with adjustments to short term lodging permit fees, as the City targets a 68% cost recovery for the first year.
Harbor Department
The Harbor Department is responsible for many harbor-related programs and services within the city, including but not limited to, managing the guest marina, and renting available slip space and moorings. The Harbor Department was last studied in FY 2020-21. Many of the fees have proposed increases to align with the current cost of providing these services.
Many of these fees are market-based rates that are adjusted annually in-line with the regional cost of inflation, typically amounting to $10 or less, to align the fees with the current cost of providing these services. Fees that have notable increases include Environmental Response, Impound Fees, and the Large Boat Escort/Permit due to transitioning to staff to conduct the response instead of relying on another agency, increase in costs related to staffing, and the recalculation of time and effort in performance service, respectively.
There are several new fees proposed related to harbor services:
Towing Fee for Abandoned/Impounded Boats Over 14’ but less than 25’ – The Harbor Department needs to move impounded boats more often than originally anticipated. Staff has the capability and capacity to tow boats in this size category. The proposed fee of $377 would allow cost recovery from vessel owners for services provided.
Rhine Wharf Permit – The Harbor Department took over the responsibility for writing permits for the use of the commercial Rhine Wharf in 2022. In 2023, there were 53 Rhine Wharf permits issued. The proposed fee of $28 is for processing the applications received and is reflective of the resources dedicated to application review and permit issuance.
Variance Applications – This proposed fee of $498 is reflective of the process and effort required to review harbor related variance requests to deviate from current zoning requirements. The process for variance requests specific to the harbor had not previously been defined since the last fee study and mirrored a structure utilized by the Community Development Department, which has limited applicability to dock, pier permits and other structures over tidelands, prompting the need for a distinct individual fee.
Use of electrical cord and/or adapter while at Marina Park – Staff members have frequently loaned their limited supply of electrical adapters to mariners arriving at the Marina Park facility without appropriate equipment. The proposed fee of $10 would allow for cost recovery related to the rental and wear and tear on such equipment provided by the Harbor Department.
Purchase (non-return) of electrical cord or adapter – In the event that an electrical adapter or cord that was loaned to a mariner while staying at the Marina Park facility is not returned or is returned in damaged condition, a proposed fee of $75 would be assessed to reimburse the Harbor Department and allow for the equipment to be replaced.
Mooring size exchange – Staff is recommending recovering 100% of the cost of this service as outlined in Attachment B at a fee of $302. Should the City be successful in reconfiguring one or some of the mooring fields according to the Harbor Commission’s recommendations, the opportunity to apply for a mooring size adjustment within the reconfigured field(s) will no longer exist. As defined in Title 17, along with other aspects of the mooring field optimization project, mooring permittees in a reconfigured field will have the opportunity to apply for a mooring size exchange.
Mooring license application fee – The new mooring license program for City controlled moorings launched at the beginning of 2024. Applications for these mooring licenses are accepted through the City’s online system. The $26 proposed fee considers staff time for reviewing and processing of applications.
Mooring license waitlist fee (one time or annual) – Staff has noted that there has been significantly more demand for mooring licenses – currently 16 – than there is supply. Those applicants not offered licenses will be placed on a waitlist for when an existing or new license becomes available. The proposed fee of $34 considers the maintenance of the application records on the waitlist and City resources consumed.
Group/exclusive use fee for Marina Park – Staff exerts additional effort when a group of mariners desires to have sole and exclusive access to the Marina Park marina facility due to the time required to coordinate the group member reservations, arrivals, departures, special requests, and organized activity. The proposed fee of $502 equates to a 100% cost-of-service recovery.
Mooring Assists – After Hours – By special arrangement, Harbor Department staff remains on duty past normal working hours to support a visitor or resident mariner getting onto or off a mooring. This proposed fee of $200 considers staff time to provide a service that ensures safety during inclement weather, or for mariners unfamiliar with the harbor and mooring tackle.
Deposit/late cancellation fee for use of Human Lift – Marina Park – Staff has noted that on several occasions within the past year, a mariner with a reservation to use the Human Lift at Marina Park cancelled or failed to show up for the use of the lift after utilizing staff time for setup. The proposed fee of $31 considers staff time to setup the lift and is intended to prevent the unnecessary use of resources required for deployment of the lift for unused reservations. There is no cost to the mariner to use the lift and the deposit is returned when the mariner uses the lift as scheduled or cancels with sufficient advanced notice.
Deposit/late cancellation fee for use of Human Lift – Balboa Marina PD – The proposed fee of $117 considers setup and use of the human lift at the new public dock at Balboa Marina which requires more resources than deployment at Marina Park due to the transport required to the location. This fee is also being proposed to prevent cancellations and no shows related to reservation for use of the lift. There is no cost to the mariner to use the lift and the deposit is returned when the mariner uses the lift as scheduled or cancels with sufficient advanced notice.
The overall fiscal impact in the Harbor Department pertaining to the proposed service-related fees for a target 100% cost recovery is an estimated increase of $20,000 in revenues, where most of the fiscal impact increase is derived from the adjustments linked to impounded vessel releases.
Public Works
The Public Works Department is responsible for managing a comprehensive capital improvement program, including the promotion of a safe and efficient transportation system. Public Works also manages public property through permitted encroachments; ensures the safety of utility company activities, private construction, and special events in the public right-of-way; reviews plans for residential and commercial development as they relate to the public right of-way; and oversees activities that protect and improve the harbor and upper bay. The Public Works Department was last studied in FY 2020-21. The proposed changes to Public Works fees cover Engineering & Harbor Resources, Refuse, and Water Quality/Conservation/Environmental Services.
Changes to existing fees for the Public Works Department include:
An additional Engineering Field Inspection fee will be applied with a Street Closure Permit that requires a field inspection. This is noted in both the Engineering Field Inspection fee and the Street Closure Permit fee as a footnote.
Recycling Service Fee – Per Residential Unit, Per Month – This fee would replace the two existing fees with one combined fee of $6.39. This fee is a cost-of-service fee based solely on recovery of operational costs associated with the collection of recyclable materials in accordance with State mandates.
Construction and Demolition – This fee would make changes to the presentation of the current Demolition fee, distinguishing between Complete Demolition Deposit and Construction Demolition Deposit for a series of valuation ranges as identified in the proposed schedule. The construction and demolition deposits are intended to encourage compliance and are refundable if the applicant uses an approved franchise hauler and arranges for an inspection. Should the applicant fail to meet conditions required on the permit, the deposit would be subject to forfeiture. Having two distinguishing fees will aid in achieving waste diversion compliance with Assembly Bill (AB) 939 and CalGreen requirements, as well as allow for accurate reporting to CalRecycle.
The Public Works Department is also proposing changes to NBMC Section 15.02.085 (Addition of Section 105.3.1.1) relating to the administrative code to refine language for the Construction and Demolition permits, as identified in Attachment D.
Most of the fiscal impact in the Public Works Department for service-related fees is associated with adjustments to review of street closure permit requests and administration of diversion requirements associated with construction demolition. An increase of $66,000 in estimated revenues with the proposed fees is anticipated.
Utilities
The Utilities Department is responsible for overseeing the management and maintenance of water, wastewater, storm drain and tidal valve systems to provide clean, safe and responsive utility and infrastructure maintenance services to the community. The department was last studied in FY 2020-21.
The proposed new fees in the department include:
Meters, Boxes, Lids, Etc. – The proposed fee consolidates a base fee of $53 plus a pass-through of the actual cost of materials for a meter, box, lid, etc. It should be noted that the pass through of the actual costs of materials is reflected in the current SRFF with price points identified for each meter, box, or lid; the base fee is the proposed new aspect of the fee which would allow for a proposed cost recovery of 100% associated with staff time involvement.
Water and Sewer Services Establishment Fee. Remote Activation – The proposed Remote Activation fee of $52 under the Water and Sewer Establishment Fee requires less staff time than instances where Onsite Activation is required and proposes 100% cost recovery.
The overall fiscal impact in the Utilities Department pertaining to the proposed service-related fee changes is an estimated decrease of $115,000 in revenues, with approximately $143,000 of the decrease pertaining to the new remote activation fee which is offset in part by estimated revenue increases to other fees.
Other Updates
Even when a department is not scheduled for a comprehensive fee study, occasionally, operations will change enough that the non-studied departments will request one or two fee study changes for consideration and adoption. As part of this study and to present a comprehensive and thorough update of the City’s fees and current operations, staff considered the following additional updates outside of the departments scheduled to be studied.
The Information Technology Department is proposing an hourly rate for A/V technical support related activities for both business hours and non-business hours at $144 and $173, respectively, for a 100% proposed cost recovery. This fee is intended to be charged in any instance in which an additional level of IT support is required, for example, on-site IT support associated with facility rentals.
The Police Department is proposing renaming the Civil Subpoena fee to Civil Subpoena (per day; per employee) and including language to clarify that actual cost will be charged in addition to $275 per day . This fee is utilized when any staff member is requested to appear in court for administrative hearings, civil trials, court actions, etc. Actual amounts paid would be calculated in accordance with California Government Codes 68096.1 and 68097.2.
The Police Department is also proposing a revised fee structure for Towing and Vehicle Release/ Repossession Fees as follows:
Tow Operator Fee to be eliminated
Customer Fee increased from $110 to $156
Vehicle Release Fee increase from $20 to $29
Staff is proposing to eliminate the Tow Operator Fee and have the cost proportioned out to the Customer Fee and the Vehicle Release Fee. This proposal is intended to eliminate the franchise fee and set the user fee at 100% cost recovery with the full cost to be borne by the party being towed. The fee is not intended to be punitive to any victims of a crime; staff is also proposing that the Police Chief have the authority to waive fees related to towing in particular circumstances as reflected in Section 5 of the proposed resolution.
A credit card convenience fee of 2.85% has been included in the all-departments section for online credit card payments. The City has allowed users the convenience of making payments via credit card and has incurred costs in the processing of those payments. This fee would allow the City to recover its costs associated with online payments. The credit card convenience fee will be phased in across all departments to allow time for outreach to communicate the change and will start with utilities. The fiscal impact associated with adding in the 2.85% fee to online utility bill payments is $439,000.
The Community Development Department is proposing minor revisions to descriptions in the Banner Permit fee title to Banner/Sign Permit and to include a footnote in the General Plan Maintenance Fee - % of Building Permit Fee that the fee will be applied as five percent (5%) to permit fees for all new construction, additions, and additions with alterations for residential and commercial projects for clarification purposes.
The Vendor Transaction Fee for Online Payment Processing has been renamed as Parking Meter Mobile Application Payment Processing fee; this fee continues to be a pass-through fee.
CPI Updates – Those fees listed in the SRFF that are subject to CPI adjustment based on prior resolutions are due to be increased by 3.2% effective July 1, 2024. The City’s methodology in calculating the change in CPI is by comparing the U.S. Bureau of Labor Statistics (BLS) March CPI of the prior year to March CPI of the current year. BLS releases monthly CPI data around mid-month of the following month (e.g. March 2024 CPI data would be released April 2024). It is proposed that the City update the methodology to compare BLS February CPI of the prior year to February CPI of the current year as identified in the proposed resolution to better align with the timing of when fees are presented to the City Council. The change in CPI from February 2023 to February 2024 is an increase of 3.2%.
Subsequent to July 1, 2024, annual CPI adjustments shall apply to these fees, as well as to the cost-of-service fees for each of the departments that were studied as part of this fee update.
FISCAL IMPACT:
Staff estimates that these fees, if approved by the City Council as recommended, will amount to approximately $581,000 of additional revenues for the City. However, this projection does not account for any fees where volume statistics are unavailable. The City Council’s policy of ensuring regular review of the City’s cost-of-service fees and adequate cost recovery will continue to ensure adequate cost recovery from users of the City’s fee-related services. This then facilitates the redirection of general tax revenues currently subsidizing fee-supported services to maintaining and enhancing non-fee supported services and programs.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to Government Code Sections 66018(a) and 6062a (published for 10 days, on two publication dates separated by at least five days between them: notices were published on April 11, 2024, and April 18, 2024), Government Code Sections 66016(a) (notice mailed at least 14 days prior to the meeting to any interested party who files a written request: notices were mailed to Building Industry Association of Southern California, Southern California Edison, and Southern California Gas Company on April 3, 2024), and the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A – Fiscal Year 2023-24 Studied Department Changes Attachment B – Resolution No. 2024-29
Attachment C – Ordinance No. 2024-12 (Amending Municipal Code Section 3.36.030) Attachment D – Ordinance No. 2024-13 (Amending Municipal Code Section 15.02.085) 14-3
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Revising Certain Fees Within the Schedule of Rents, Fines and Fees, Authorizing the Waiver of Vehicle Tow Fees, Adopting a Credit Card Convenience Fee, and Updating the Methodology for Annual Consumer Price Index Calculations April 23, 2024
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