FOR THE COUNCIL MEETING OF NOVEMBER 19, 2024
COUNCIL AGENDA REPORT
TO: City Council
FROM: Acting City Manager Chuen Wu
BY: Interim Director of Finance Xenia Bradford
SUBJECT: Adoption of a Resolution approving a Commercial Building Inspection User Fee
Description:
The City Council will conduct a Public Hearing and consider approving the addition of a Commercial Building Inspection User Fee.
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 of a Commercial Building Inspection User Fee at 100 percent cost recovery.
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 sho uld 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.
On April 20, 2021, the City Council adopted Resolution 2021-39 establishing (a) user fees identified in a user fee study and (b) a user fee cost recovery level policy. This included the finding that Citywide user-specific services are provided for the benefit of the public, and that said services should be paid by the user in an amount sufficient to adequately cover the cost to the City. The City contracted with Revenue and Cost Specialists (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. During the Fiscal Year 2024-26 budget development process, RCS met with City staff to discuss the addition, removal, and/or adjustment of user fees. A comprehensive fee update was adopted by the City Council in 2 June of 2024. Staff recommends updating the Commercial Building Inspection User Fee to 100 percent cost recovery as shown in Attachment A.
DISCUSSION:
The 2024 Long -Range Master Plan; Community Risk Assessment and Standards of Cover Update identified three areas of improvement for commercial properties and target hazards, as follows:
Section A-1: Identify all commercial properties and target hazards. Section A-2: Develop a schedule to inspect all commercial occupancies. Section A-3: Review and adopt fee schedule and implement proposed increases.
The Fire Department has developed a commercial occupancy inspection program and is currently identifying all commercial occupancies within the City of Santa Maria. An inspection schedule has been established. Currently the Fire Department is utilizing a flat fee that does not reflect the size of a building. The proposed inspection fees are based on the square footage of buildings and the estimated time for an inspector to complete the fire and life safety inspection. This methodology is consistent with surr ounding jurisdictions.
The proposed user fee establishes the appropriate mechanism to fulfill these requests from the public. The user fees requested reflect the true cost of providing these services including 100 percent of the cost of personnel, materials, and overhead and are included on Attachment A.
Alternative(s)
If the City Council chooses not to add the new fee at this time, the City will continue to subsidize Commercial Building Inspection services with other revenues. The City Council may:
(1) Elect not to approve the Commercial Building Inspection fee at 100 percent cost recovery. The General Fund will subsidize the user fee collected to cover the full cost of the service.
(2) Direct staff to evaluate alternate fees and return to City Council for consi deration.
However, the user fee study based its findings on a cost-based analysis and since any alternate fees will be based on the same information, they will not differ from that which is currently proposed.
Staff recommends adoption of the Commercial Building Inspection fee at 100 percent cost recovery, as shown on Attachment A, to become effective January 1, 2025.
Fiscal Considerations
The user fee as proposed is calculated to recover the costs of providing this service. Cost- based fees ensure the amount collected is the same as the City’s expense to provide the service, thus eliminating subsidies from other sources.
3 Impact to the Community
Charging appropriate fees lessens subsidies and increases overall resources to provide general services to the public.
ATTACHMENTS Attachment A: Proposed Commercial Building Inspection Fee