City of Sacramento
City Council - 5PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2025-00868 5/20/2025 Item 19.
Proposed Fire Prevention Fee Adjustments [Published 05/9/2025, 05/15/2025] File ID: 2025-00868
Location: Citywide
Recommendation: Conduct a public hearing and upon conclusion adopt a Resolution approving the proposed Fire Prevention Fee adjustments.
Contact: Tilden Billiter, Deputy Chief, (916) 808-1603, [email protected]; Jason Lee, Fire Marshal, (916) 808-1620, [email protected]; Fire Department Presenter: Tilden Billiter, Deputy Chief, (916) 808-1603, [email protected]; Jason Lee, Fire Marshal, (916) 808-1620, [email protected]; Fire Department Attachments:
1-Description/Analysis
2-Resolution
3-Exhibit A (Current & Proposed SFD Fire Prevention Fees) 4-Exhibit B (Regional Fee Comparisons)
5-Exhibit C (Sacramento Fire Department Fee Study Report) Description/Analysis
Issue Detail: On February 7, 2006, the City Council formally adopted a Citywide Fees and Charges Policy (Resolution No. 2006-106) to ensure that City fees and charges reflect the Council’s direction regarding recovery of costs related to providing programs and services. The last fee increase for the Fire Prevention program was included in the February 6, 2018, Citywide Fees and Charges (Resolution No. 2018-0059). In July 2024, the Fire Department contracted with a third-party consultant, MGT of America Consulting, LLC dba MGT Consulting, to conduct a user fee study after the council's direction in June 2024, which was completed in March 2025. Based on the consultant’s findings, staff recommend fee adjustments to the Fire Prevention program to recover costs associated with providing these services.
In addition to the proposed fee adjustments, staff recommend adopting new development inspection and plan check fees to recover the cost of the required services to process plan checks and inspect new developments. Other agencies in the region charge these fees to offset the cost of the services
File ID: 2025-00868 5/20/2025 Item 19.
for planning review and inspections.
Based on council recommendations and stakeholder feedback from outreach meetings, the department has worked with the fee consultant to reduce fees for small businesses. The cost recovery was adjusted for restaurants and other small assembly businesses, under the fee title A2/A3. (Places of Assembly A-2 occupancies of 50-99 and A-3 occupancies of 100+) to 75% of the recommended fee, which will decrease the offset by $(175,513).
The changes to the City’s Fire Prevention program fees are summarized in Exhibit A.
The Sacramento Fire Department fee study full report from MGT is in Exhibit C.
Policy Considerations: The changes are consistent with the Council’s adopted Fees and Charges Policy and support the City Councils direction from June of 2024 budget sustainability and fiscal responsibility goals.
The voters passed Proposition 26 on November 2, 2010, amending Article XIII C of the State Constitution. According to the ballot measure, the intent of the measure is to ensure the effectiveness of Propositions 13 and 218 by providing a definition of a “tax” for state and local purposes “so that neither the Legislature nor local governments can circumvent these restrictions on increasing taxes by simply defining new or expanded taxes as ‘fees’.” Thus, under Proposition 26, a tax has been defined broadly to include any levy, charge, or exaction of any kind imposed by a local government, except for seven specified categories of charges. Moreover, the city bears the burden of proving that a fee or charge is not a tax. The proposed fees are not a tax under Proposition 26 because of exception 3 (permits and inspection fees).
Economic Impacts: Not applicable.
Environmental Considerations: This report concerns administrative activities that will not have a significant effect on the environment and does not constitute a “project” as defined by the California Environmental Quality Act (CEQA) [CEQA Guidelines Section 15061 (b) (3); 15378 (b) (2)].
Sustainability: Not applicable.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: The Fire Prevention Service fees were last assessed and increased in 2018; however, they were limited to 75% of the actual assessment. The Department hired a consultant to determine the costs of providing fire prevention services and the resulting fees that would recover these costs. The proposed fees are based on recovering the direct staff costs for providing services. Department and citywide overhead expenses, known as indirect costs, have not been included. In addition, the 2025 proposed fees are similar to those charged in the Sacramento
File ID: 2025-00868 5/20/2025 Item 19.
region, and some of the initial fees were further refined to be more in line with other comparable agencies in the region. Over the last seven years, fire prevention costs have risen due to increasing employee costs and benefits. Additionally, the costs for services have increased because of higher operational overhead to support the Fire Prevention Division, including technology, vehicles, and equipment maintenance. These increased expenses have made it necessary to reevaluate the fee structures to ensure the financial sustainability of our fire prevention efforts.
Time calculations were reviewed and updated since the 2018 fee study, based on current practices and technologies. Increased Fire Prevention staffing since 2018 has led to more efficient workflows for fire inspections and fire plan reviews, streamlining the process and enhancing customer service.
These changes have resulted in more effective operations, allowing for quicker inspection response times and improved accuracy in assessments. The updated workflows and time estimate further support the fee recommendations and ensure they reflect the actual effort required to continue to provide these services.
Financial Considerations: The Fire Department proposes adjustments to the current rate structure that will reflect the costs of providing fire prevention services and align the City’s fees more closely with those charged in the region, as shown in Exhibit B. Staff also recommends an annual inflation adjustment based on the Consumer Price Index to ensure that fees keep pace with service provision costs and prevent sharp fee increases every few years when a fee study is conducted. Regional jurisdictions, like the Sacramento Metropolitan Fire District, use this methodology. Additionally, the department has committed to internal controls and will perform a third-party review of fees at the end of every three-year period, starting in July to allow time to communicate any changes with the business community before the next fiscal year.
Revenue estimates for this increase total approximately $3.2 million annually. The City is currently in a structural budget deficit, with a $62.2 million deficit projected for Fiscal Year (FY) 2025/26 and deficits growing in future fiscal years as cost growth outpaces revenues. On February 25, 2025, the Council approved the one-time use of prior year savings to address the FY2025/26 budget gap, resulting in the City needing $44.1 million in budget-balancing solutions. On March 7, 2025, the City published budget-balancing options that have been identified by City departments. This fee increase is option R9, and approval of this fee increase will help balance the FY2025/26 budget. It will lower forecasted deficits in future fiscal years as an ongoing balancing strategy.
Local Business Enterprise (LBE): Not applicable.
RESOLUTION NO
Adopted by the Sacramento City Council
PROPOSED FIRE PREVENTION FEE ADJUSTMENTS
BACKGROUND
A. The Fire Department Fire Prevention Services is responsible for providing inspections, permits and overseeing new construction in the City of Sacramento. These services are General Fund activities supported by fees charged for services.
B. On February 7, 2006, the City Council adopted the Citywide Fees and Charges policy (Resolution No. 2006-106).
C. The last increase of Fire Prevention fees occurred with the revision of the Citywide Fees and Charges policy (Resolution No. 2018-0059) on 2/6/2018.
D. The costs to provide Fire Prevention Services have increased significantly over the past seven years.
E. The most recent revision of the Citywide Free and Charges policy (Resolution No. 24-153) occurred in May 2024 without an increase in Fire Prevention fees.
F. The existing Fire Prevention fees do not include a provision to adjust fees based on annual inflation. The ability to adjust fees annually will allow for recovery of increasing labor and service and supply costs.
G. The proposed new Fire Prevention fees and fee adjustments are set forth in Exhibit A.
H. Regional Fee Comparison is shown in Exhibit B.
I. The Sacramento Fire Department fee study full report from MGT is in Exhibit C.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The existing Fire Prevention fees and fee adjustments in the Citywide Fees and Charges policy are amended as shown in Exhibit A.
Section 2. Exhibit A is part of this resolution.
Section 3. The Citywide Fees and Charges policy for the Fire Prevention Program is amended to include an annual fee increase beginning July 1, 2025, and each July 1st thereafter, by the percentage change in the Consumer Price Index (CPI) Series Title: Urban Wage Earners and Clerical Workers the U.S. City Average, All Urban Consumers —not seasonally adjusted, for San Francisco-Oakland- San Jose, CA as published by the U.S.
Department of Labor, Bureau of Labor Statistics for the twelve (12) month period ending
annually, and CPI increases will be implemented, provided that the increase doesn’t exceed the cost of providing services.
Section 4. The Fire Prevention fee changes will be effective July 1, 2025.
City of Sacramento
Fire Department's Fire Prevention Fees
Fire Prevention Fees: Effective July 1, 2025
Permit Fee Description SFD Current
Fee
Proposed
Fee 1
Aerosol Products (>500 LBS) $343 $601
Amusement Buildings $851 $1,465
Apartment 3-15 Units - Self Certification $51 $108
Apartment 16-30 Units $274 $481
Apartment 31-60 Units $357 $625
Apartment 61-100 Units $442 $769
Apartment 101-150 Units $524 $908
Apartment151-200 Units $611 $1,057
Apartment 201-250 Units $696 $1,201
Apartment 251-300 Units $781 $1,345
Apartment 301-350 Units $781 $1,345
Apartment 351-400 Units $865 $1,489
Apartment 401-450 Units $950 $1,633
Apartment 451-500 Units $1,036 $1,777
Apartment 501+ Units $1,036 $1,921
Arson - Background Check $33 $48
Arson - Report Copies $56 $119
Artists Live and Work $343 $601
Aviation Facilities $851 $1,465
Candles/open flames $259 $457
Cannabis Grow Facility or Dispensary $470 $817
Carnivals/Fairs $386 $673
Cellulose Nitrate Film $343 $601
Combustible Storage $513 $889
Compressed Gases $343 $601
Consultation Fee $169 $288
Copy of Reports (Each Document) $6 $108
Cryogens $343 $601
Daycare (9-14) Occupants $343 $268
Daycare (15-49) Occupants $428 $745
Daycare (50-99) Occupants $428 $745
Daycare (Commercial 100+) Occupants $428 $745
Dry Cleaning Plant $428 $745
Dust Producing Oper/storage $428 $745
Exhibit/Trade Shows $682 $1,177
Explosive Blasting Agent Storage $513 $889
Failure to Prepare/Cancel $343 $601
Flammable/Combustible Liquids $343 $601
City of Sacramento
Fire Department's Fire Prevention Fees
Fire Prevention Fees: Effective July 1, 2025
Permit Fee Description SFD Current
Fee
Proposed
Fee 1
Floor Finish $343 $601
Fruit Ripening $343 $601
Garage Repairs/Motor Vehicle Fuel $428 $745
Hazardous Materials $513 $889
Hazardous Production Facilities $809 $1,393
Heliport/Helistop $259 $457
Helistop (Special Event) $343 $601
High Piled Storage $428 $745
Hood System $386 $673
Hot Food Vendor- Annual $301 $529
Hot Works/ Cutting and Welding $343 $601
Hotel/Motel (3-8 Rooms) $343 $601
Hotel/Motel (9-16 Rooms) $428 $745
Hotel/Motel (17-30 Rooms) $513 $889
Hotel/Motel (31-60 Rooms) $597 $1,033
Hotel/Motel (61-90 Rooms) $724 $1,249
Hotel/Motel (91-120 Rooms) $809 $1,393
Hotel/Motel (120+ Rooms) $894 $1,537
Hourly Inspection Fee $169 $288
Inspection- After Hours (Special Event Inspections) $254 $432 Institution (14 or Less) Occupants $528 $922
Institution (15-49) Occupants $909 $1,570
Institution (50-199) Occupants $1,291 $2,218
Institution (200+) Occupants $1,630 $2,794
Knox Box Servicing $84 $144
Late Payment Fee $107 $107
Liquid Petroleum Gas (LPG) $343 $601
Lumber Yard/Woodwork $640 $1,105
Magnesium $343 $601
Malls $1,234 $2,113
Marinas $428 $745
Multi Story Bldg (75 FT +) $0.0038 $0.004
Notice and Order to Abate $2,737 $4,691
Notice and Order to Abate - Appeal $1,666 $2,884
Open Burning $216 $385
Organic Coating Application $343 $601
Ovens (Industrial Baking/Drying) $343 $601
Places of Assembly (A-1) $540 $1,465
Places of Assembly (A-2 & A-3) 100+ $450 $739
City of Sacramento
Fire Department's Fire Prevention Fees
Fire Prevention Fees: Effective July 1, 2025
Permit Fee Description SFD Current
Fee
Proposed
Fee 1
Places of Assembly (A-2 & A-3) 50-99 $327 $667
Places of Assembly (A-4 & A-5) $654 $7,045
Pyrotechnics and Special Effects $301 $529
Pyrotechnics Public Display $301 $529
Radioactive Materials $470 $809
Refrigeration Equipment $343 $601
Re-Issuance of Annual Permit $30 $65
Residential Care Facility (<25) Occupants $169 $288
Residential Care Facility (25+) Occupants $169 $288
Special Event Planning N/A $600
Schools $169 $288
Spraying or Dipping $343 $601
Technology Fee $0.10 $0.11
Temporary Membrane Structures $216 $385
Tire Storage (> 1000 Cubic FT) $470 $817
Wood Products $470 $817
Development Fee Changes: Effective July 1, 2025
Development Fee: Administrative Fee $82 $173
Development Fee: Fire Plan Review Fee $149 $255
Development Fee: Fire Inspection Fee - New Building 2 $0.093 $0.11 Development Fee: Fire Inspection Fee -Tenant Improvement $0.059 $0.08 Development Fee: Plan Review- Schools Per Hour $108 $473 Development Fee: Minimum Permit Fee $169 $288
Development Fee: Overtime / Expedite Plan Check $253 $432 Development Fee: Regular Time $169 $288
* New fees are listed as N/A in the current fee column
1 Fees will be adjusted annually, beginning July 1, 2025, and each July 1st thereafter, by the percentage change in the Consumer Price Index (CPI)
Series Title: Urban Wage Earners and Clerical Workers, not seasonally adjusted, as published by the U.S.
Department of Labor, Bureau of Labor
Statistics for the twelve (12) month period ending December 31 of the preceding year.
City of Sacramento
Base Fee Comparisons of Local Fire Department's Fire Prevention Fees Fire Prevention Fees: Effective July 1, 2025
Permit Fee Description SFD Current
Fee
Proposed
Fee 1 Metro Roseville West
Sacramento
Average
Comparisons
Aerosol Products (>500 LBS) $343 $601 $630 $390 N/A $510 Amusement Buildings $851 $1,465 $947 $296 $231 $491
Apartment 3-15 Units - Self Certification $51 $108 $473 $390 N/A $431 Apartment 16-30 Units $274 $481 $630 $584 $346 $520
Apartment 31-60 Units $357 $625 $947 $584 $346 $625
Apartment 61-100 Units $442 $769 $1,262 $584 $346 $730
Apartment 101-150 Units $524 $908 $1,262 $584 $346 $730 Apartment151-200 Units $611 $1,057 $1,262 $584 $346 $730 Apartment 201-250 Units $696 $1,201 $1,262 $584 $346 $730 Apartment 251-300 Units $781 $1,345 $1,262 $584 $346 $730 Apartment 301-350 Units $781 $1,345 $1,578 $584 $346 $836 Apartment 351-400 Units $865 $1,489 $1,578 $584 $346 $836 Apartment 401-450 Units $950 $1,633 $1,578 $584 $346 $836 Apartment 451-500 Units $1,036 $1,777 $1,578 $584 $346 $836 Apartment 501+ Units $1,036 $1,921 $1,578 $584 $346 $836 Arson - Background Check $33 $48 N/A N/A N/A N/A
Arson - Report Copies $56 $119 N/A N/A N/A N/A
Artists Live and Work $343 $601 N/A N/A N/A N/A
Aviation Facilities $851 $1,465 $1,262 N/A $231 $746
Candles/open flames $259 $457 N/A N/A $231 $231
Cannabis Grow Facility or Dispensary $470 $817 N/A $390 N/A $390 Carnivals/Fairs $386 $673 947 N/A $231 $589
Cellulose Nitrate Film $343 $601 $630 $390 $231 $417
Combustible Storage $513 $889 $630 $390 $231 $417
Compressed Gases $343 $601 $630 N/A 231 $430
Consultation Fee $169 $288 N/A N/A N/A N/A
Copy of Reports (Each Document) $6 $108 N/A N/A N/A N/A Cryogens $343 $601 $630 $390 $231 $417
Daycare (9-14) Occupants $343 $268 $630 $584 N/A $607
Daycare (15-49) Occupants $428 $745 $630 $584 N/A $607
Daycare (50-99) Occupants $428 $745 $947 $776 N/A $861
Daycare (Commercial 100+) Occupants $428 $745 $1,420 N/A N/A $1,420 Dry Cleaning Plant $428 $745 $630 N/A N/A $630
Dust Producing Oper/storage $428 $745 $630 $390 $231 $417 Exhibit/Trade Shows $682 $1,177 $630 $972 $231 $611
Explosive Blasting Agent Storage $513 $889 $788 N/A $231 $510 Failure to Prepare/Cancel $343 $601 N/A N/A N/A N/A
Flammable/Combustible Liquids $343 $601 $630 $390 $231 $417 Floor Finish $343 $601 $630 $390 $231 $417
Fruit Ripening $343 $601 $630 $390 $231 $417
Garage Repairs/Motor Vehicle Fuel $428 $745 $630 $390 $231 $417 Hazardous Materials $513 $889 $1,292 $390 $231 $637
Hazardous Production Facilities $809 $1,393 $1,292 $390 $231 $637 Heliport/Helistop $259 $457 N/A $390 N/A $390
Helistop (Special Event) $343 $601 N/A $390 N/A $390
High Piled Storage $428 $745 $788 $1,354 $231 $791
Hood System $386 $673 $1,354 N/A N/A $1,354
Hot Food Vendor- Annual $301 $529 N/A N/A N/A N/A
Hot Works/ Cutting and Welding $343 $601 $630 $296 $231 $385 Hotel/Motel (3-8 Rooms) $343 $601 $788 $390 $246 $475
Hotel/Motel (9-16 Rooms) $428 $745 $788 $390 $346 $475
Hotel/Motel (17-30 Rooms) $513 $889 $947 $584 $346 $625 Hotel/Motel (31-60 Rooms) $597 $1,033 $947 $584 $346 $625 Hotel/Motel (61-90 Rooms) $724 $1,249 $947 $584 $346 $625 Hotel/Motel (91-120 Rooms) $809 $1,393 $1,262 $584 $346 $730
City of Sacramento
Base Fee Comparisons of Local Fire Department's Fire Prevention Fees Fire Prevention Fees: Effective July 1, 2025
Permit Fee Description SFD Current
Fee
Proposed
Fee 1 Metro Roseville West
Sacramento
Average
Comparisons
Hotel/Motel (120+ Rooms) $894 $1,537 $1,578 $584 $346 $836 Hourly Inspection Fee $169 $288 $315 $390 $231 $312
Inspection- After Hours (Special Event Inspections) $254 $432 $472 $584 $288 $448 Institution (14 or Less) Occupants $528 $922 $947 $298 N/A $623 Institution (15-49) Occupants $909 $1,570 $1,292 $447 N/A $870 Institution (50-199) Occupants $1,291 $2,218 $1,578 $447 N/A $10,113 Institution (200+) Occupants $1,630 $2,794 $4,102 $596 N/A $2,349 Knox Box Servicing $84 $144 $339 N/A N/A $339
Late Payment Fee $107 $107 N/A N/A N/A N/A
Liquid Petroleum Gas (LPG) $343 $601 $788 $299 $231 $439 Lumber Yard/Woodwork $640 $1,105 $788 $299 $231 $439
Magnesium $343 $601 $630 N/A $231 $431
Malls $1,234 $2,113 $947 $299 $231 $492
Marinas $428 $745 N/A N/A N/A N/A
Multi Story Bldg (75 FT +) $0.0038 $0.004 $2,524 N/A $461 $1,492 Notice and Order to Abate $2,737 $4,691 N/A N/A N/A N/A Notice and Order to Abate - Appeal $1,666 $2,884 N/A N/A N/A N/A Open Burning $216 $385 $78 N/A $115 $96
Organic Coating Application $343 $601 $788 N/A N/A $788 Ovens (Industrial Baking/Drying) $343 $601 N/A $299 N/A $299 Places of Assembly (A-1) $540 $1,465 $947 $447 $231 $541 Places of Assembly (A-2 & A-3) 100+ $450 $739 $788 $447 $231 $488 Places of Assembly (A-2 & A-3) 50-99 $327 $667 $473 $299 $231 $334 Places of Assembly (A-4 & A-5) $654 $7,045 $947 $599 $346 $630 Pyrotechnics and Special Effects $301 $529 $1,893 $600 N/A $1,246 Pyrotechnics Public Display $301 $529 $630 $895 N/A $763 Radioactive Materials $470 $809 N/A N/A $231 $231
Refrigeration Equipment $343 $601 $630 N/A N/A $630
Re-Issuance of Annual Permit $30 $65 N/A N/A N/A N/A
Residential Care Facility (<25) Occupants $169 $288 $630 $150 N/A $390 Residential Care Facility (25+) Occupants $169 $288 $947 $150 N/A $549 Special Event Planning N/A $600 N/A N/A N/A N/A
Schools $169 $288 $1,893 $599 N/A $1,246
Spraying or Dipping $343 $601 $630 N/A $231 $430
Technology Fee $0.10 $0.11 N/A N/A N/A N/A
Temporary Membrane Structures $216 $385 $788 $447 $231 $488 Tire Storage (> 1000 Cubic FT) $470 $817 $788 N/A $231 $339 Wood Products $470 $817 $788 $299 $231 $439
Development Fee Changes: Effective July 1, 2025
Development Fee: Administrative Fee $82 $173 $117 N/A N/A $117 Development Fee: Fire Plan Review Fee $149 $255 $315 N/A N/A $315 Development Fee: Fire Inspection Fee - New Building 2 $0.093 $0.11 N/A N/A N/A N/A Development Fee: Fire Inspection Fee -Tenant Improvement $0.059 $0.08 N/A N/A N/A N/A Development Fee: Plan Review- Schools Per Hour $108 $473 $315 N/A N/A $315 Development Fee: Minimum Permit Fee $169 $288 N/A $150 N/A $150 Development Fee: Overtime / Expedite Plan Check $253 $432 $692 $175 N/A $175 Development Fee: Regular Time $169 $288 $315 $150 N/A $232 * New fees are listed as N/A in the current fee column
1 Fees will be adjusted annually, beginning July 1, 2025, and each July 1st thereafter, by the percentage change in the Consumer Price Index (CPI) Series Title: Urban Wage Earners and Clerical Workers, not seasonally adjusted, as published by the U.S. Department of Labor, Bureau of Labor Statistics for the twelve (12) month period ending December 31 of the preceding year.
Fire Department User Fee Study
Final Report of Findings
City of Sacramento, CA
APRIL 11, 2025
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CITY OF SACRAMENTO
FIRE DEPARTMENT USER FEE STUDY
APRIL 11, 2025
TABLE OF CONTENTS
EXECUTIVE SUMMARY ................................................................................................1 SUMMARY OF FINDINGS .............................................................................................2 User Fee Financial Overview.................................................................................................................... 2 Fee Recovery....................................................................................................................................................2 Methodology ........................................................................................................................................... 4 Hourly Rates.....................................................................................................................................................4 Time Spent.......................................................................................................................................................4 Fee Calculations and Revenue Projections....................................................................................................4 Legal, Economic & Policy Considerations................................................................................................ 5 ANALYSIS HIGHLIGHTS...............................................................................................6 Fire Department – Fire Prevention Division ............................................................................................. 6 Fee Updates .....................................................................................................................................................6 Fire Department – Emergency Medical Services (EMS) Division.............................................................. 7 Fee Updates .....................................................................................................................................................7 RECOMMENDATIONS ..................................................................................................9 APPENDIX A – USER FEE RESULTS ........................................................................... 10 Fire Prevention Fees – 99% Fee Recovery ............................................................................................. 11 EMS Fees – 100% Fee Recovery............................................................................................................ 14 PAGE 1
Executive Summary
Introduction
MGT is pleased to present the City of Sacramento (City) with this summary of findings for the recently completed City of Sacramento Fire Department (EMS and Prevention) user fee study.
The City contracted with MGT to perform a Fire Department user fee study using fiscal year 2023- 2024 budgeted expenditures, staffing costs, and operational information. The City’s current fees represent the fees being charged at the beginning of this study.
This report is the culmination of an extensive study conducted by MGT in collaboration with the City’s Fire Department, fiscal leads, manage ment and staff. MGT would like to take this opportunity to gratefully acknowledge all staff (administrative staff and each division chief) who participated in this project for their efforts and coordination.
Study Scope and Objectives
The study included a review of fees for service ac tivities within the Fire Department. The study was performed under the general direction of the Deputy Chief with the participation of key staff members and leaders from: Prevention, Suppressi on, EMS, Special Ops, and Training divisions.
The primary goals of the study were to:
Determine the City's full costs to provide specific fee-related services. Determine whether there are any opportunities to implement new fees. Identify service areas where the City might adjust fees to better reflect the full cost of services or to subsidize fees with general fund revenue to reflect other economic or policy considerations.
Develop fiscal projections based on recommended increases (or decreases) to fees.
The information summarized in this report addresses each of these issues and provides the City with the tools necessary to ma ke informed decisions about any proposed fee adjustments and the resulting impact on restricted and general fund revenues.
PAGE 2
Summary of Findings
User Fee Financial Overview
The study's primary objective was to provide th e City's decision-makers with the basic data needed to make informed pricing decisions. This report details the full cost of services and presents recommended proposed fees and fisc al projections based on recommended cost recovery levels. The fee analysis adheres to Proposition 26 whic h mandates that user fees be based on the "estimated reasonable cost of pr oviding a service." Recommendations are based on careful consideration of the results of the cost analysis, and historical cost recovery levels The charts below show the annualized costs and revenues for the City’s user fees that were part of this analysis. Staff are recommending setting fee recovery levels at 100% cost recovery for almost all fees, except for two charged by Fire Prevention. Some fees are increasing, some are remaining as-is (i.e., pass-through fees), while other fees will be reduced to comply with California user fee law (Prop 26) which prohibits government agencies from recovering more than 100% of their reasonable cost. It is difficult to predict future revenues due to the fluctuation in the volumes and economic conditions, therefore the recomme nded increased revenues below should be considered estimated projections. MGT based the annual cost on the individual full cost for each fee analyzed multiplied by the annual volume statistics for the past year.
Fee Recovery
Column A, User Fee Costs – This column represents what the actual cost is for each of the departments to provide annual user fee services based on the annual volume statistics. In total, this study evaluated $172M in costs to provide user fee services. It is this amount that was the focus of this study and represents the total potential for user fee-related revenues for the City.
Column B, Current Revenues – This column represents “Revenue Opportunity,” which is simply current fees multiplied by expected volume of activity (call volume). Because of payer mix and insurance caps, the City might never see that full amount as revenue.
Based on current fee recovery levels, the City receives fee-related cost recovery equal to $122M and is experiencing an overall 71% cost recovery level. Column C, Current Subsidy – Current fee levels recover 71% of full cost, leaving 29%, or $49.9M, to be funded by other sources. This subsidy represents an opportunity for an updated and more focused cost recovery effort by the City for fee-related services. Column D, Recommended Recovery – It is estimated that adoption of the recommended fees would increase cost re covery to $172M. This would bring the overall cost recovery level up to 100%.
Column E, Increased Revenue – Assuming activity levels remain relatively static, approximately $49.9M in additional cost reco very could be received by the City. This
PAGE 3
would represent a 40% increase over the amounts currently being collected for these activities by the City on an annualized basis.
PAGE 4
Methodology
A cost-of-service study is comprised of two basic elements:
Hourly rates of staff providing the service.
Time spent providing the service.
The product of the hourly rate calculation multiplied by the time spent yields the cost of providing the service.
Hourly Rates
The hourly rate methodology used in this study bu ilds indirect costs into City staff hourly salary and benefit rates to arrive at fully burdened hourly rates. Fully burdened hourly rates are a mechanism used to calculate the total cost of providing services. Total cost is generally recognized as the sum of the direct cost together with a proportionate share of allowable indirect costs. The proper identification of all costs (i ncluding labor, operating expense, department administration and Citywide support) as “direct” or “indirect” is crucial to the determination of the total cost of providing services.
Direct costs are typically defined as those that can be identified specifically to a particular function or activity, including the labor of peopleworking directly on the specific service for which the fee is charged, and possibly materials or supplies those people use for the task. Indirect costs are those that support more than one program area and are not easily identifiable to specific activities. Examples of indirect costs are:
x Departmental administrative and support staff
x Training and education time
x Public counter and telephone time
x Some service and supply costs
x Citywide overhead costs from outside of the de partment as identified in the City’s cost allocation plan.
Time Spent
The next step in the process was to identify sta ff time spent directly on each user fee activity.
Each staff person involved in the user fee services identified the time necessary to complete each task associated with a given user fee service. A nnual volume statistics were also gathered to develop total annual workload in formation. This information is provided in detailed user fee workbooks which were provided to the City upon completion of the study.
Fee Calculations and Revenue Projections
Given this information, MGT was able to calculat e the cost of providing each service, both on a per-unit and total annual basis (per-unit cost mu ltiplied by annual volume equals total annual cost). As mentioned above, costs were calculated by multiplying per-unit time estimates by the hourly labor rates; additional operating expenses directly associated with certain services were also included. Finally, if other departments or di visions provided support for certain user fee activities, this time was accounted for and added into the analysis as a crossover support activity.
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Full costs are then compared to current fees/revenues collected, and subsidies (or over- recoveries) are identified.
User fee summaries by department can be found in the next section of this report.
Legal, Economic & Policy Considerations
Calculating the true cost of providing City services is a critical step in the process of establishing user fees and corresponding cost recovery levels. Although it is an important factor, other factors must also be given consideration. City decision makers must also consider the effects that establishing fees for services will have on the individuals purchasing those services, as well as the community.
The following legal, economic and policy issues help illustrate these considerations. Legal Restrictions - In California, user fees are limited to the "estimated reasonable cost of providing a service" by Gove rnment Code section 66014(a) and other supplementary legislation. California voters approved Proposition 26 in November of 2010, which defined “taxes” as “any levy, charge, or exaction of any kind imposed by a local government” subject to seven exceptio ns. Most of the exceptions require that the City charge a fee which does not exceed the reasonable cost to the City to provide the service for which the fee is charged. Thus, if the fee exceeds the reasonable cost of service, it may be considered a “tax” which must be approved by the voters. We have calculated each fee to recover no more than the reasonable cost of each service so that none of the fee adjustments reco mmended herein will be considered taxes under Proposition 26. Additionally, it should be noted that some fees may be capped by state law and may not change, regardless of any cost analysis performed. Community benefit - The Council might wish to subsidize some user fees to reflect policy considerations which supersede cost recovery. For example, many Community Services fees have very moderate cost recovery levels. Some programs are provided free of charge or for a minimal fee regardless of cost. Youth and senior programs tend to have the lowest recovery levels. Misce llaneous classes tend to have a moderate cost recovery level and adult sports progra ms typically have a higher cost recovery level. No such fees were analyzed in this study.
Private benefit - If a user fee primarily benefits the fee payer, we recommend the fee be set at, or close to, 100% full cost recovery. Fire Prevention-related fees generally fall into this category; howe ver, exceptions are sometimes made at the direction of the Board.
Service driver - In conjunction with the second point above, the issue of who is the service recipient versus the service driver should also be considered. Managing demand - For those fees which are not su bject to pure cost recovery limitations, other market considerations may inform recomm ended fee levels.
Elasticity of demand is a factor in pricing certain City services; increasing the price of some services results in a reduction of demand for those services, and vice versa. Competition - Certain services may be provided by neighboring communities or the private sector and therefore demand for th ese services can be highly dependent on what else may be available at lower prices. Furthermore, if the City's fees are too low, demand enjoyed by private-sector competitors could be adversely affected. Incentives - Fees can be set low to encourage participation in a service.
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Analysis Highlights
Below is a brief discussion of the findings for the division’s analysis. Please see the user fee summary sheet in Appendix A of this report for the details on each fee calculation and cost analysis.
Fees are charged in a variety of ways including:
Flat (or fixed) fees – the fee is always the same, regardless of size or complexity of the service provided in each instance.
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TWYNRJћFSIћRFYJWNFQX– City staff track time and materials expense, and fees are calculated to recover actual costs.
Actual cost – this fee is charged to recover consultant costs as billed to the City, or time and materials of staff.
Fire Department – Fire Prevention Division
The Fire Prevention Division pr ovides a safer environment for the citizens of Sacramento by preventing the loss of life and property caused by fire or explosion through public education, the enforcement of fire codes, laws and City ordinances related to fire and life safety.
Fire Prevention completes its mission by revi ewing commercial and residential permits for compliance with currently adopted Fire and Buildin g codes; reviewing applications consisting of Site Development Permits, Development Agreements, Zone Changes, Tentative and Final Maps, Tentative and Final Subdivision Maps, Commercial, Industrial and High/Low Density Residential Development; and inspections, complaints, code enforcement, issue appropriate permits, respond to incidents as needed, daily paper work and business are handled.
Fire Prevention inspections and permits benefit individuals and the community and are therefore eligible for cost recovery. Because these fees prima rily benefit the fee payer, the fees are set at or close to 100% of the cost of recovery.
Within the Fire Prevention Divisi on, current fees recover 53% or $4,531,543, with actual costs at $8,495,228, which is a difference of $3,963,685 or 47%. If staff recommendations are adopted, cost recovery would increase to $8,378,031, adding an additional $3,846,488 in revenue (estimated projections).
In keeping with State law, the target cost recovery percentage must not exceed 100%. Assuming no loss in demand or change in volume, fee adjustments result in a 99% overall recovery rate. We are proposing fee reductions on some permits and fee increases on others to keep the cost aligned with the level of effort to provide the services and to keep within State cost recovery limits.
Fee Updates
The Fire Prevention Division is keeping the original structure of their fee schedule, therefore we are not recommending any fee structure updates. Examples of restructuring edits would be adding new fees, deleting fees that have become obsolete, expanding fees, and consolidating fees.
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Department management is recommending 100% cost recovery for all fees except for the following:
x Places of Assembly (A-2 & A-3) 100+
x Places of Assembly (A-2 & A-3) 50-99
Cost recovery for those fees is set at 75%.
There are one hundred and three (103) fees on the Prevention Division fee schedule. No new fees are being added, and none are being removed from the fee schedule. Because of the length of time since the last study, they are all increasi ng, on average by 46%. Assuming demand remains consistent, the recommended fee adjustments w ill result in an additional $3.9M in annual revenue.
Fire Department – Emergency Medical Services (EMS) Division The Emergency Medical Services (EMS) Division provides a safer environment for the citizens of Sacramento by responding to EMS calls for servic e, providing basic and advanced life support and emergency medical transports.
EMS user fee services benefit individuals that request or need the service and are therefore eligible for cost recovery. Because these fees prima rily benefit the fee payer, the fees are set at or close to 100% of the cost of recovery. It is important to note that because of the way MediCal, Medicare and private insurers settle charges, not all revenues in the user fee model will be seen by the city. Because of payer mix and other caps on EMS charges to insurance, all expected revenues in the MGT model may not be achievable.
Within the EMS Division, current fees recover 72% of full cost, with actual costs at $163M, which is a difference of $45.9M or 28%. If staff re commendations are adopted, cost recovery would increase to full cost, adding an additional opportunity for approximately $45.9M in revenue (estimated projections).
In keeping with State law, the target cost recovery percentage must not exceed 100%. Assuming there is no loss in demand or change in volume, fee adjustments result in a 100% overall recovery rate.
Fee Updates
The EMS Division is keeping the original structure of their fee schedule; therefore, we are not recommending any fee structure updates. We are adding five (5) new fees for the following activities/treatments listed below along with the full cost:
1. Bariatric Unit Usage, $109
2. Extra Attendant Fee, $117
3. Lift Assist at Medical Facilities, $30
4. Medical Assisted Treatment Services, $84
5. Mobile Crisis Services (per hour), $117
Department management is recommending 100% co st recovery for all fees. ALS and BLS fees have the largest percentage increase at 33-35%, while other treatments have increases of as little PAGE 8
as 11%. Assuming demand remain s consistent, recommended fee ad justments will result in an additional $45M in annual revenue.
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Recommendations
MGT recommends that the City GZNQI TS NYX NS[JXYRJSY NS YMNX HTXYћTKћXJW[NHJ FSFQ^XNX G^ continuing to analyze its fees an d charges, whether this is done by staff or outside consultants.
Once the commitment is made to understand the full cost of providing services, it is important to review and update the analysis to keep pace with changes in service delivery, staffing changes, and demand levels.
Most agencies ask us at the conc lusion of the study: how often should this type of study be undertaken? Our advice is to perform this detailed analysis at least every three but not more than KN[J^JFWX\NYMRNSTWFIOZXYRJSYXNSYMJSTSћXYZI^^JFWX YTPJJp pace with economic impacts).
MGT recommends the City apply an inflation adjustment to fees annually, based on CPI or COLA, to keep pace with inflation. The industry’s best pr actice is to apply this index once per year as part of the City’s annual budget process. This is particularly helpful once an agency has chosen to adopt a cost recovery policy – whether 100% of the cost or something less – to keep fees at the desired level.
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Appendix A – User Fee Results
The following pages show the individual fee study results.
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Fire Prevention Fees – 99% Fee Recovery
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EMS Fees – 100% Fee Recovery