April 29, 2025
Agenda Item No. 21
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:
Resolution No. 2025-17: Revising Certain Fees Within the Schedule of Rents, Fines and Fees 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 2024-25, the City engaged a consultant, ClearSource Financial Consulting (ClearSource), to update the fees in the Library Services and the Recreation and Senior Services Departments, following a cost recovery analysis. Staff also identified other fee updates outside of the studied departments.
RECOMMENDATIONS:
a) Conduct a public hearing;
b) 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; and c) Adopt Resolution No. 2025-18, A Resolution of the City of Newport Beach, California, Revising and Adopting Fees Within the Schedule of Rents, Fines, and Fees.
DISCUSSION:
Newport Beach Municipal Code (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 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 that 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 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, 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 years. This year, ClearSource studied the Library Services Department and the Recreation and Senior Services Department.
A large part of fees presented in these departments are related to a market-based component for reserved access to public space in Newport Beach. As part of this study, ClearSource met with City staff from each studied department to discuss the services provided, the staff resources and time estimates for delivering the related services, and the use of the public space facilities. 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. A cost recovery analysis was provided to show whether the departments have cost recovery in aggregate.
Based on the results of the fee study, it is common for some fees to increase while others decrease. The most common reasons for these changes are:
1) changes in costs, which most often increase over time; 2) changes in the staff performing the service; and/or
3) changes in the time required to perform the service.
Once the calculations are confirmed, department staff recommends either full cost recovery or a subsidy for the fee.
The remainder of this report focuses on how studied fees are changing. Before and after illustrations of each department’s studied fees can be found 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 13, 2025, 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.
Library Services Department
The Newport Beach Public Library has a mission “to serve as the cultural, educational and informational heart of the city.” There are four branch locations throughout the city that provide an array of services, programs and events to the public. The department was last studied in FY 2021-22.
Many of the Library fees have no proposed changes in the areas of Processing Charges for Replacement Items, Fines for Overdue Materials, Library Services, and Replacement Costs of Materials. Notable increases are in the rates for the Central Library Community Room rental, with considerations given to room size and available amenities while aiming to maintain modest rates. The Library Cancellation Charge, Setup and Cleanup Fees for the Central Library Community Room, Test Proctoring, and Passport Photo Fees are determined by cost-of-service time estimates.
In this department, the following changes are proposed:
1. Deposits: Central Library Community Room – The Central Library Community Room Deposit and Refundable Cleaning Deposit have been consolidated into one fee. Previously, $196 was asked up front as a deposit and $96 from deposits were refunded if there are no damages. In most cases, the deposit has always been refunded. The proposed consolidation of the fee will now deduct any damages from the initial $100 deposit.
2. Fines for Overdue Materials: Video Games, Rental Movies – A change was made to incorporate rental movies to the category.
3. Library Services: Fax Machine Use – A fee of $1 per page has been reflected in this section.
The proposed changes to Library fees have no fiscal impact as a target cost recovery of 1% remains. It should be noted that the services the Library provides for the public benefit of the community are primarily subsidized by the General Fund, grants and donations and contributions.
Recreation and Senior Services Department
The Recreation and Senior Services Department (RSS) works to enhance the community’s quality of life by providing safe and well-maintained facilities and parks. The department responds to community needs through quality educational, recreational, cultural and social programs for people of all ages. The department was last studied in FY 2021-22.
A portion of the fees in RSS have limited cost recovery percentages or dollar amounts as indicated in NBMC Section 3.36.030 Exhibit “A”. As such, certain fees shown in the proposed changes do not reflect any variances and no adjustments to municipal code are necessary at this time.
In this department, the following changes are proposed:
1. Administration: Parent & Me Swim and Swim Lessons – Changes to presentation of fees have been made to eliminate redundancy. Nonresident fees are addressed in Registration and Contract Classes: Nonresident Additional Charge – Classes. Resident classes under Swim Lessons have also been updated to be subject to the Consumer Price Index (CPI).
2. Facility Use Deposits: Cleaning Fee & Security Guards– These fees have been moved to a new section under Rental and Event Fees.
3. Lincoln Gymnasium – All fees associated with the rentals at the Lincoln Gymnasium have been removed as the rental function is being administered by Newport Mesa Unified School District.
4. Newport Coast Community Center: Preschool Room – The Newport Coast Community Center is making available a space of approximately 500 square feet to rent out with Commercial Rates, Non-Profit Rates, and Private Rates proposed.
5. Senior Services: OASIS Garden Membership – New fees are proposed for the rental of various sizes of garden plots in the OASIS Garden as the City is taking over the administration of the program from the Friends of OASIS.
6. Special Events: Surf Contest-Amateur Late/Day of Registration Fee – A $5 fee for late registrations to the surf contest is proposed to encourage on time registration.
7. Special Services: Preschool 101 – The fees under this program are proposed to be eliminated. Use for the program has dwindled as the Newport Mesa Unified School District, which offers Transitional Kindergarten (T-K) at all Newport Beach elementary schools, continues to expand preschool offering locations.
8. Junior Lifeguard Building: Various Subsections – With the opening of the Junior Lifeguard Building in June 2024, new facility fees are proposed for the rental of the building and patio area.
9. Lecture Hall: Lecture Hall – The Lecture Hall will offer seating for 299 patrons and is expected to be completed in January 2026. Proposed rental rates are provided for the lecture hall for both resident and nonresidents under Commercial Rates, Non-Profit Rates, Private Rates, and a Resident Non-profit Youth Service Organization Rate.
10. Lecture Hall: Stahr Courtyard – The Stahr Courtyard will be adjacent to the Lecture Hall and has proposed rental rates for resident and nonresidents under various rate categories.
11. Lecture Hall: A/V Specialist – A new pass-through cost for an A/V specialist is proposed for instances where an A/V Specialist is requested with a facility rental.
The overall fiscal impact for the proposed fee updates in the RSS Department targets a 29% cost recovery and is an estimated increase of $192,000 in revenues.
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 on the City’s fees and current operations, staff considered the following additional updates outside of the departments scheduled to be studied.
The Community Development Department is proposing updates to the following:
1. Special Inspector Licenses – There is a new procedure from a paper process to an online application that has made processing time for both new applications and renewals more efficient. It is proposed that the staff review of each trade classification for new applications and renewals be combined to one fee of $59 per certification.
2. Coastal Development Permit (CDP): All Others – It is recommended that the All Others fee category be removed as this fee was originally added in as a contingency measure in case a deposit account on a CDP was requested. A footnote is recommended to be added to CDP Standalone that would indicate that a move to a deposit base can occur should staff find that additional work is required.
3. Environmental Documents – A footnote is recommended for clarification.
4. Extension of Time – To consolidate fees, the Subdivision Code and ZC (except Abatement Period) are proposed to be combined into one. The rates for both fees are presently the same and would be increased by CPI once the inflationary factor is determined.
5. Subdivisions – Tentative Tract Map & Vesting Tentative Map fee – These fees are proposed to be combined into one fee as the conditions of approval are the same. In the last study update, the fee for Vesting Tentative Map was erroneously not updated for CPI which accounts for the differences in rates presently reflected.
Notably, the Finance Department will be completing the two-year phase-in of the Short-Term Lodging Initial Permit and Renewal rates to reflect full cost recovery after they were approved by the City Council in April 2024; the rates for these fees will be $300 and $336, respectively. It is proposed to include a Change of Information fee under the Short-Term Lodging Permits section that incorporates processing times comparable to the Change in Information in Business License of $14.
The Finance Department is also proposing clarifying language to FilmLA rates with a footnote that the rates are passed through based on the contract rates set by the vendor. Additionally, dog license fees that were previously listed in the Finance Department will be reflected under the Police Department in the SRFF as the department processing most license applications has changed.
Various Development Impact Fees and an In Lieu Park Dedication Fee are proposed to be added and reference Resolutions No. 2024-83 and 2024-75, respectively. Only the development impact fees would be subject to CPI.
A minor update is proposed in the Public Works Department to update the Appeals section title to Public Hearing & Appeals.
After meeting with the Finance Committee, additional necessary updates to the SRFF were noted. In the Library Services Department, the maximum overdue fines for DVDs and Tech Toys are being adjusted to $10 and $100, respectively, to align with the Newport Beach Public Library (NBPL) Circulation Policy 12 that was reviewed on January 21, 2025. The Junior Lifeguards Program: Junior Guard Administrative Fee was erroneously listed as $116 for FY 2024-25 in the previous iteration of the SRFF; a correction is being made to reflect the fee as $121 for that fiscal year. In the Fire Emergency Medical Services section, the ALS and BLS First Responder Fee has been updated to reflect the subsidy rate as established by municipal code. In the Fire Prevention section, the titles related to certain staff members were also updated due to position reclasses. Additionally, a request to include the General Fund subsidies for the studied departments is discussed in the Fiscal Impact section of this report.
CPI Updates – Those fees listed in the SRFF that are subject to CPI adjustment based on prior resolutions are due to be increased by 3.1% effective July 1, 2025. The City’s methodology in calculating the change in CPI is by comparing the U.S. Bureau of Labor Statistics (BLS) February CPI of the prior year to February CPI of the current year. BLS releases monthly CPI data around mid-month of the following month (e.g. February 2025 CPI data would be released March 2025). The change in CPI from February 2024 to February 2025 is an increase of 3.1%.
Subsequent to July 1, 2025, annual CPI adjustments shall apply to these fees, as well as to the cost-of-service fees and market rate fees for each of the departments that were studied as part of this fee update.
Additionally, fees and rents that have CPI updates based on alternate indexes such as certain rental agreements or utilities fees subject to the utility rate schedule shall be updated throughout the year to account for said changes established by prior resolutions.
FISCAL IMPACT:
Subject to City Council approval of the fees as recommended, the net fiscal impact of the proposed fee changes is projected to increase the City’s revenue by $192,000, as summarized in the table below. However, this projection does not account for any fees where volume statistics are unavailable.
EXHIBIT 1 - FISCAL IMPACT OF PROPOSED FEE CHANGES
Fee Related Services
Fund
Current Fee Revenue
Proposed Fee Revenue
Fiscal Impact
Current Cost Recovery
Target Cost Recovery
Note
Library Services
General Fund
$ 91,000
$ 91,000
$ -
1%
1%
[a]
Recreation & Senior Svcs.
General Fund
$6,409,000
$6,601,000
$192,000
28%
29%
[b]
Total
$6,500,000
$6,692,000
$192,000
[a] Majority of fees and fines for specialized library services remain unchanged. [b] In alignment with the City’s adopted cost recovery policies, adjustments are proposed. The adjusted amounts will correspond to the February-to-February CPI change when data is available. The amounts shown are intended to reflect reasonable estimates.
The Library Services and Recreation and Senior Services Department have some fees with cost recovery ranges or set figures identified in NBMC 3.36.030; these fees are subsidized in part by general revenues.
Library Cost Recovery
The Library Services Department recovers approximately 1% of its annual operating costs through fees and fines, resulting in a $14.95 million annual subsidy from the General Fund. This level of subsidy is generally consistent with other libraries across the state, as libraries are primarily funded by General Fund resources. Additional funding may come from donations, grants and revenue generated through sales or fundraising activities. Very little revenue is typically collected from fines or overdue fees, which are intended mainly to encourage patrons to return borrowed materials on time and in good condition, ensuring that resources remain available to other users. Most cities in Orange County are served by the Orange County Library System, resulting in fewer comparable cities. Nonetheless, a survey of cities shows that, on average, 5% of program costs are recovered through fees and charges, which is generally consistent with the cost recovery rate in Newport Beach.
City
Percentage of Costs Recovered
through Fees & Charges
Fullerton
7%
Mission Viejo
6%
Yorba Linda
2%
Average
5%
Recreation & Senior Services Cost Recovery
The Recreation & Senior Services Department currently recovers approximately 28% of its annual service costs through program fees and charges, resulting in a $16.05 million annual subsidy from the General Fund. If the City Council approves the recommended changes to the SRFF, the department’s cost recovery rate will increase to 29%. Although cost recovery varies by program area, the department’s overall recovery rate is generally consistent with that of other parks and recreation agencies. According to the National Recreation and Park Association, the typical agency recovers about 25% of its operating expenditures through fees and charges. A survey of cities shows that, on average, 31% of program costs are recovered through fees and charges, which is generally consistent with the cost recovery rate in Newport Beach.
City
Percentage of Costs Recovered
through Fees & Charges
Buena Park
15%
Costa Mesa
21%
Fountain Valley
24%
Laguna Niguel
26%
Lake Forest
52%
Mission Viejo
49%
Tustin
33%
Average
31%
The City Council's policy of regularly reviewing the City's cost-of-service fees and ensuring adequate cost recovery will continue to help achieve appropriate cost recovery from users of the City's fee-supported services. This approach allows for the redirection of general tax revenues, currently subsidizing fee-supported services, to maintain and enhance 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 10, 2025, and April 17, 2025), 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 7, 2025), and the Brown Act (72 hours in advance of the meeting at which the City council considers the item).
ATTACHMENTS:
Attachment A – Fiscal Year 2024-25 Studied Department Changes Attachment B – Redlined Schedule of Rents, Fines, and Fees for FY 2025-26 Attachment C – Resolution No. 2025-17
21-3
21-1
Resolution No. 2025-17: Revising Certain Fees
Within the Schedule of Rents, Fines and Fees
April 29, 2025
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