COUNCIL AGENDA REPORT
TO: Mayor and City Council
FROM: Rebecca Campbell, Director of Finance
DATE: June 3, 2025
SUBJECT: Adoption of a Resolution Approving an Updated 2025 User Fee Schedule
Description:
The City Council will hold a public hearing and consider approving the addition and update of the Citywide User Fees identified in the Annual User Fee Update and 2025 User Fee Schedule.
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 2025 User Fee Schedule.
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 sub sidizing a service 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 fee 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 2 adopted a User Fee Cost Recovery Level Policy with a goal for full cost recovery of user fees by July 2026.
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 revenu e of $2.7 million. 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.
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 built on the prior year’s analysis and further addressed specific fee adjustment requests from Citywide departments. The presented fees represented full cost recovery. For the fees reviewed with that study, staff recommends applying a Consumer Price Index to FY 2025-26 fee schedule.
DISCUSSION:
During the FY 2025 -26 Mid-Cycle Budget Update 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 pri or 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 B) recommends recovering the full cost of providing each fe e-related service and calculates the potential revenues at full (100 percent) cost -recovery levels. Pages 2 through 5 of the report discuss three fees evaluated this year, including the following:
Copy Fees: Clarification on the calculation and processing of various copying fees.
o Recommendation: The City should apply the $0.10 per page limit only for FPPC-related documents. For all other documents, the City is allowed to recover the actual cost of reproduction, which the courts have held includes the staff time spent at the copy machine making the copy. This allows for costs in excess of $0.25, but it makes sense to leave the fees as is, especially since mos t documents are delivered electronically and not actually copied these days. The cost of memory devices (thumb drives) purchased by the City is approximately $5 each. Building plan copies are performed by outside businesses and the City’s fee is to recover what the City has paid.
3 Credit Card Processing Fee: Recalculate actual credit card processing fee to ensure full cost recovery.
o Recommendation: RCS analysis shows the average credit card transaction fee was between 1.2 percent and 29.7 percent, and the average processing fee was 2.8 percent. The City of Santa Maria’s current credit card processing fee is 2.5 percent, and RCS recommends keeping the same fee.
Bid Protest Fee: In support of an update of the City’s current Purchasing Guidelines through the d evelopment of a Procurement Policy and Procedures Manual, staff requested that RCS calculate the full cost of providing two bid protest services. Staff provided draft bid protest procedures, which outlines the process and identifies staff involved in the services.
o Recommendation: Based on discussions with City staff, RCS calculated the fees based on the most current fully burdened hourly rates and recommends the City Council adopt the fees at 100 percent cost recovery, consistent with all other user fees th roughout the City, at the time the Procurement Policy and Procedures Manual is presented to the City Council for adoption.
Pages 5 through 19 of the Annual User Fee Update report compare the current fee to the fee proposed to become effective July 1, 2025 . User fees that are not proposed to be changed at this time are listed on pages 19 through 21 of the Annual User Fee Update report and are also presented to be included in the Master User Fee Schedule. The ir current fees are included in the 2025 User Fee Schedule (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.
For the fees reviewed with this study, staff recommends applying a Consumer Price Index to the FY 2025-26 fee schedule based on the 12-month percent change to the Consumer Price Index (CPI) for All Urban Consumers, Los Angeles-Long Beach-Anaheim, CA area.
The CPI change for 2024 is 3.3 percent, therefore RCS increased this group of fees by a multiplication factor of 1.033. Fees less than $10 show the same amount due to rounding.
Staff recommends the adoption of the user fees, effective July 1, 2025, based on the Full Cost Recovery Fee as shown in the Annual User Fee Update report (Attachment B). If the fees are not adjusted to 100 percent recovery, the City will be subsidizing the services.
Alternative(s)
The City Council can choose to adjust fees to l ess than the full cost recovery or to not apply the Consumer Price Index to the FY 2025-26 fee schedule based on the 12-month percent change to the Consumer Price Index (CPI) for All Urban Consumers, Los Angeles-Long Beach-Anaheim, CA area. If the City Council chooses not to increase the 4 fees at this time, the City will continue to subsidize personal-choice services with other revenues.
Fiscal Considerations
The City set fees to full cost recovery in 2024, the proposed increase by CPI will help the City maintain full cost recovery.
Impact to the Community
Charging appropriate fees lessens subsidies and increases overall resources to provide general services to the public.
ATTACHMENTS
A: Resolution
B: Annual User Fee Update