FOR THE COUNCIL MEETING OF JUNE 4, 2024
COUNCIL AGENDA REPORT
TO: City Council
FROM: Interim City Manager Alex Posada
BY: Interim Director of Finance Xenia Bradford
SUBJECT: Adoption of a Resolution approving the User Fee Schedule 2024
Description:
The City Council will consider approving the addition and update of the Citywide User Fees identified in the Annual User Fee Update and User Fee Schedule 2024.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
RECOMMENDATION:
Adopt a Resolution approving the addition and update of Citywide User Fees identified in the Annual User Fee Update and User Fee Schedule 2024.
BACKGROUND:
"User fee" activities are defined as services the City provides to individuals who receive some material benefit from these services. The user fee philosophy holds that the cost of providing these services should be borne by the group receiving the benefit, not the community as a whole. User fee services are differentiated from general public benefit services, such as police and fire which are largely tax-supported. For the most part, City fees should be set at full cost recovery to avoid subsidizing the activities of specific groups/individuals. However, to promote activities and actions, fees may be set at less than full cost recovery. An example of subsidizing a se rvice to benefit the community is the establishment of swimming fees at less than full cost recovery to promote exercise and good health.
In October 2019, after a competitive Request for Proposal process, the City contracted Revenue and Cost Specialists ( RCS) to conduct a year -long comprehensive study of services provided by the City and to develop user fees that represent "full cost" recovery as allowed by law. On May 4, 2021, based on the 2020 Comprehensive Fee Study, the City Council adopted a master fe e Resolution increasing fees, effective July 1, 2021, to 50 percent of the increase of the Cost of Study proposed fees. In addition, the City Council adopted a User Fee Cost Recovery Level Policy with a goal for full cost recovery of user fees by July 2026.
2 The City contracted with RCS to update user fees annually. In the calendar year 2022, and every even year forward, RCS will conduct a review of the City’s user fees, updating the City’s Cost Allocation Plan (CAP), salary, position data, and adopted budget. On April 4, 2023, the City Council was presented with the results of a comprehensive fee study.
The recommendations included consideration of user fee increases to full 100 percent recovery which would have generated an increase in revenue of $2.7 mill ion. Another approach, which was adopted by the City Council was to increase user fees in a phased- in approach, which estimated an increase in revenue of $1.6 million. The City Council further directed staff to return with the Fiscal Year (FY) 2024-25 budget development to consider raising fees to full cost recovery. The item is now presented to the City Council per the City Council's direction.
DISCUSSION:
During the FY 2024-26 budget development process, RCS met with City staff to discuss the addition, removal, and/or adjustment of user fees. This round of recommended fee updates by RCS builds on the prior year’s analysis and further addresses specific fee adjustment requests from Citywide departments. The presented fees represent full cost recovery.
The Annual User Fee Update report (Attachment A) recommends recovering the full cost of providing each fee -related service and calculates the potential revenues if the City Council approves fees at full (100 percent) cost -recovery levels. Pages 1 through 12 of the User Fee Schedule 2024 (Exhibit A) compare the current fee to the fee proposed to become effective July 1, 2024. User fees that are not proposed to be changed at this time, include Library Fees (non-facility rentals), building plan check and inspections fees, Police Department services for special public events, and Recreation and Parks facility and program fees, are also presented to be included in the Master User Fee Schedule.
Their current fees are included in the User Fee Schedule 2024 (Exhibit A) so that the City Council may simply adopt a master fee Resolution. Lastly, fees for some services, such as services for special public events, cannot be determined until the service is provided and for that reason are not itemized on the proposed fee schedule. Rather, it is noted that fees that are not itemized on the fee schedule will be charged at a fully allocated rate for the position providing the service.
Staff recommends the adoption of the user fees, effective July 1, 2024, based on the Full Cost Recovery Fee as shown in the Annual User Fee Update report (Attachment A) and summarized in the table on the next page, which shows the potential revenue growth of approximately $1.1 million. If the fees are not adjusted to 100 percent recovery, the City will be subsidizing the services.
3 For the fees reviewed with his study, staff recommends applying a Consumer Price Index to Fiscal Year 2025-26 fee schedule. Another comprehensive fee study will be conducted for the fees prior to the 2026-27 fiscal year.
The City Council may direct staff to engage in an additional study to review fees that were not studied with this fee update and that are not proposed to be changed at this time .
These fee categories are Library (non-facility rentals), building plan check and inspection fees, Police Department services for special public events, and Recreation and Parks facility and program fees.
Alternative(s)
The City Council can choose to adjust fees to less than the full cost recovery. If the City Council chooses not to increase the new fees at this time, the City will continue to subsidize personal-choice services with other revenues of approximately $1.1 million.
Fiscal Considerations
The overall fiscal impact is $1.1 million in additional revenue.
Impact to the Community
Charging appropriate fees lessens subsidies and increases overall resources to provide general services to the public.
ATTACHMENTS Attachment A: Annual User Fee Update