32605 Temecula Parkway, Suite 100
Temecula, CA 92592
Toll free: 800.676.7516
Fax: 951.296.1998
1 M E M O R A N D U M
To: Lina Velasco, Community Development Director, City of Richmond From: Nicole Kissam, Director and Lauren Guido, Consultant, NBS Date: April 14, 2021
Re: Initial Fee Analysis for the Housing Division
The City of Richmond’s HousingAdministrationDivision(Division) contracted with NBS tocompletea User Fee Study. The Divisiondoes not currently havean adopted schedule of fees. Adoption of a fee schedulecan providecost recovery options for essential City services.
Prior to this Study, Division staff performed initialresearch to compile a list of fees chargedfor similar services by otheragencies. This list served as abaseline for establishing acomprehensivelist offees for evaluation.
Due to timeconstraints for meeting the Finance Department’s deadline for the City’s annual Master Fee Scheduleupdate, NBS and Division staffprioritized an analysis offees for themost routine services provided by the Division. Once these fees are implemented, the Division plans to continue with analysis of additional fees that could be added at mid-year or within the next fiscal year’s budget adoption process.
This memorandum contains a summarized description of the Study’s approach and outcomes for the City’s consideration.
Section 1.Methodology and Approach
Under the legal frameworkprovided by the California ConstitutionArticle XIII C, a fee may not exceed the estimated reasonable cost of providing the service or performing the activityfor which the fee is charged.
The goal of a fee study is toestablishthe total cost of providingservices andthen translate those costs into a schedule of fees for services.The City Council can then consider feesfor adoption either at or below the 100% cost recovery level established by the Study. The following three phases of analysis were required to accomplish the Study’s goal: 1) Cost of service analysis, 2)Fee establishment, and 3)Cost recovery evaluation. 2 Section2. Cost of Service Analysis
A cost of service analysis compilesand analyzesthe full cost of providing governmental services and activities.
There are two primary types of costs considered: direct and indirect costs.Direct costs are those which specifically relate to the activity in question, including the real-time provision of the service.Examples of direct costs include salary, wages and benefits expenses for personnel specifically involved in the provision of services and activities to the public. Indirect costs are those which support the provision of services but cannot be directly or easily assigned to the activity in question.Examples of indirect costsinclude personnel costs of line supervisors and/or departmental management,and/or the costs of City-widesupport services such as City Manager, Finance, Human Resources, etc. sourced from theCity ofRichmond’sCost Allocation Plan.
Section 3.Fully-Burdened Hourly RateCalculation
Because labor is the primary underlying factorrequiring specific actions on the part of Division staff to provide services,the full cost of service was most appropriately expressed as a fully-burdened cost per available labor hour.To derive the fully-burdened labor rate, two figures were required: the full costs of service and the number of hours available to perform those services.The full costs of service were quantified generally through the earlier steps described.The number of hours was derived from a complete listing of personnel within theDivision andreflected in the labor expenses embedded in the full cost of service.Each employee’s annual paidleave hours were approximated.Paid leave includes holidays, vacation, and sick leave.Annual allowable paid leave hours were removed from the total number of regular paid hours to generate the total number of available labor hours for the Division. These available hours represent the amount of productive time during which servicesand activities can be performed.
The productive labor hours were then divided into the annual full costs of service to derive a composite fully- burdened labor rate for the Division at the current service level (FY 2021). This composite labor ratemay then be usedto quantify costs at an individual fee level.The composite labor rate may also be used by theCity for other purposes when the need arises to calculate the full cost ofother types ofservices.
The followingtablecategorizes theHousingDivision’s costs, resulting in the fully-burdened hourly rate applicable towardrecovery of costs throughfees for services.
Housing Division Fully-Burdened Hourly Rate – Fiscal Year 2020-21 Cost Element Division Direct
Labor 431,667$
Recurring Non-Labor 20,450
Citywide Overhead 135,175
Division Admin 238,577
Division Total 825,868$
Fully Burdened Hourly Rate $ 238
3,469Reference: Direct Hours Only
3 As shown above, the total cost of theHousing AdminDivision is approximately$826,000. Based on NBS’ analysis, all subsequent cost of service calculations at the individual feelevel would assumea fully-burdened hourly rate of $238.
Section4. Cost RecoveryEvaluation
Appendix Ato this memopresents the results of the detailed cost recovery analysis of fees for theHousing AdministrationDivision. In the Appendix, the “Cost of Service per Activity” column establishes the maximum adoptable fee amount for the corresponding service identified in the “Fee Name” list.
NBS provided a full cost of service evaluation and the framework for considering fees, while theDivision determined the appropriate cost recovery levels at or below full cost amounts.The “Recommended Fee / Deposit Level” column inAppendix A displaysDivisionstaff’s initial recommended fee amounts. Based on this information, the staff recommendssettingfees between 60-66% cost recovery, depending on the fee. These initialrecommendations reflect discretion on the part of the Division based on a variety of factors, such as existing Divisionpolicies and Division-wideor City-wide revenue objectives, economic goals, community values, market conditions, level of demand, and others.For more information regardinginitial recommendations, please consult the Division’s staff report.
Section5. Conclusion
Based on the outcomes presented in thisanalysis, theDivisioncan use this informationas an interim step to establishsome initial fees for theHousingDivision’s services.
To keep pace with cost inflation theDivisionshould consider adjusting the hourly rate outcome and/or fee schedule on an annual basisby an inflationary factorsuch as Consumer Price Index, or other factor currently applied by the Finance Department to the Master Fee Schedule each year. While acomprehensive Cost of Service Analysis is not required every year,in NBS’ experience,it is bestto be performedevery three to five years as organizations change over time.
Disclaimer: In preparing this report and the opinions and recommendations included herein, NBS has relied on a number of principal assumptions and considerations with regard to financial matters, conditions and events that may occur in the future. This in formation and assumptions, including the City’s budgets, time estimate data, and workload information from City staff, were provided by sources we believe to be reliable; however, NBS has not independently verified su ch information and assumptions. While we believe NBS’ use of such information and assumptions is reasonable for the purpose of this report, some assum ptions will invariably not materialize as stated herein and may vary significantly due to unanticipated events and circumstances. Therefore, the actual results can be expected to vary from thos e projected to the extent that actual future conditions differ from those assumed by us or provided to us by others.
APPENDIX A
Cost of Service Analysis - Housing Division
Prepared by NBS for the City of Richmond
Richmond Community Development Department
Housing Division - Fee Study FY 2020-21
Cost of Service Estimate for Fee Related Services and Activities
APPENDIX A
HOUSING DIVISION FEES
PORTFOLIO MANAGEMENT
1 Subordination
Processing Fee
Single Family/Condo/Townhouse each 3.25 238$ 774$ NEW % 500$ 65% Multi-Family (Developer)
Property less than 10 years old each 6.20 238$ 1,476$ NEW % 960$ 65% Property 10+ years old each 8.20 238$ 1,952$ NEW % 1,260$ 65% Redraw Fee (Revisions)
Single Family/Condo/Townhouse each 0.50 238$ 119$ NEW % 75$ 63% Multi-Family (Developer) each 1.50 238$ 357$ NEW % 225$ 63% 2 Demand Statement each 1.00 238$ 238$ NEW % 155$ 65%
3 Re-conveyance Fee
Property less than 10 years old each 1.00 238$ 238$ NEW % 155$ 65% Property 10+ years old each 1.50 238$ 357$ NEW % 235$ 66% 4 Recording Fee each [1]
Per County
Recorder
Schedule
Per County
Recorder
Schedule
5 Notary Fee each [2] Fees set by
State
Fees set by
State
Activity Service Cost Analysis Cost Recovery Analysis
Cost of
Service
Per
Activity
Current FeeFBHR
Existing
Cost
Recovery %
Recommended
Fee / Deposit
Level
Recommended
Cost Recovery %
Fee
No. Fee Name
Fee Type
(Flat /
Deposit /
Hourly)
Notes
Estimated
Average
Labor Time
Per Activity
(hours)
NBS - Local Government Solutions
Web: www.nbsgov.com Toll-Free:800.676.7516 4/14/2021 Housing COS,Page 1 of 2 Richmond Community Development Department
Housing Division - Fee Study FY 2020-21
Cost of Service Estimate for Fee Related Services and Activities
APPENDIX A
Activity Service Cost Analysis Cost Recovery Analysis
Cost of
Service
Per
Activity
Current FeeFBHR
Existing
Cost
Recovery %
Recommended
Fee / Deposit
Level
Recommended
Cost Recovery %
Fee
No. Fee Name
Fee Type
(Flat /
Deposit /
Hourly)
Notes
Estimated
Average
Labor Time
Per Activity
(hours)
MARINA SHORES PROPERTY MANAGEMENT
6 Subordination
Processing Fee
Single Family/Condo/Townhouse each 3.50 238$ 833$ NEW % 500$ 60% Redraw Fee (Revisions)
Single Family/Condo/Townhouse each 0.50 238$ 119$ NEW % 75$ 63% 7 Demand Statement each 1.00 238$ 238$ NEW % 155$ 65%
8 Re-conveyance Fee
Property less than 10 years old each 1.00 238$ 238$ NEW % 155$ 65% Property 10+ years old each 1.50 238$ 357$ NEW % 235$ 66%
OTHER FEES
9 Fees by external departments/agencies actual cost
Actual cost as
set by external
dept/agency
Actual cost as
set by external
dept/agency
[Notes]
[1] Fees set by Contra Costa County. NBS did not evaluate. [2] Fees set by Government Code 8211. NBS did not evaluate.
NBS - Local Government Solutions
Web: www.nbsgov.com Toll-Free:800.676.7516 4/14/2021 Housing COS,Page 2 of 2