COUNCIL AGENDA REPORT
TO: Mayor and City Council
FROM: Rebecca Campbell, Director of Finance
DATE: June 2, 2026
SUBJECT: Adoption of a Resolution Approving an Updated 202 6 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 202 6 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 2026 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 recommended and the City Council adopted a methodology of applying a Consumer Price Index to future fee schedules.
DISCUSSION:
During the FY 202 6-28 Full-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 prior year’s analysis and further addresses specific fee adjustment requests from Citywide departments.
The Fee Study Update report (Attachment B) recommends recovering the full cost of providing each fee -related service and calculates the potential revenues at full (100 percent) cost -recovery levels. The Executive Summary explains RCS’s philosophy concerning fee-based services and cost analysis with a discussion of Costs Generally Defined. The report then lists the Types of Costs included in the analysis and General Recommendations.
Exhibit A to Attachment A compares the current fee to the fee proposed to become effective August 1, 2026. There are user fees that are not proposed to be changed at this time. They are also presented to be included in the Master User Fee Schedule. Their current fees are included in the 202 6 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.
3 The proposed budget includes the assumption that most Governmental Fees are set to full recovery level. The table below shows the potential revenue growth Citywide of $2.012 million, of which $1.742 million impacts the General Fund.
SERVICE
TOTAL
FEE
REVENUE
TOTAL
SERVICE
COST
TOTAL
PROFIT /
(SUBSIDY)
PCT.
RECOVERY
FROM FEES
POSSIBLE
NEW
REVENUE
ACTUAL SUGGEST
PLANNING $ 1,815,974 $ 2,504,233 $ (688,259) 72.5% VAR. $ 688,500 BUILDING 4,589,137 4,298,979 290,158 106.7% VAR. 12,100 PUBLIC WORKS 1,129,846 1,596,939 (467,093) 70.8% VAR. 466,800 CODE
ENFORCEMENT
234,529 862,230 (627,701) 27.2% VAR. 203,500
FIRE 579,588 662,816 (83,228) 87.4% VAR. 11,600
POLICE 522,371 601,249 (78,878) 86.9% VAR. 65,000
SOLID WASTE 0 10,436 (10,436) 0.0% VAR. 10,500
WATER 99,273 172,427 (73,154) 57.6% VAR. 73,200
WASTEWATER 220,809 313,771 (92,962) 70.4% VAR. 92,600 FINANCE 1,108,464 1,303,120 (194,656) 85.1% VAR. 257,900 CITY CLERK 11,612 11,651 (39) 99.7% VAR. 0
CITY ATTORNEY 0 0 0 0.0% VAR. 0
SMCTV 0 367,437 (367,437) 0.0% VAR. 0
LIBRARY 68,123 393,135 (325,012) 17.3% VAR. 1,400
RECREATION 897,536 8,704,557 (7,807,021) 10.3% VAR. 0 PARKS 0 128,811 (128,811) 0.0% VAR. 128,900
SPECIAL PROJECTS 2,024 2,157 (133) 93.8% VAR. 200
$ 11,279,286 $ 21,933,948 $ (10,654,662) 51.4% VAR. $ 2,012,200
For fees that are not reviewed in next year’s study, staff recommends applying a Consumer Price Index to the FY 202 7-28 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.
RCS recommends that the City Council adjust the fee schedule for the enumerated City services presented in Appendix A of the report. Continued use of the “full business costing” concept will create consistency in the establishment of fees and allow for timely adjustment to reflect chan ges in the cost of providing services. In addition, Recreation fees should be set by the market on an annual basis and should therefore not be included in the list of services that are increased annually by inflation. Staff agrees with these recommendations and is recommending the adoption of the user fees, effective August 1, 2026, based on the Full Cost Recovery Fee as shown in the Fee Study 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 less than the full cost recovery. If the City Council chooses not to increase the 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 starting in 2024, the proposed increased fees help the City maintain full cost recovery.
4 Impact to the Community
Adjusting the fee schedule using the “full business costing” concept ensures there is equity between taxpayers and fee -payers, as well as fairness between property -related and non -property-related service s, thereby assisting in the City’s continued financial sustainability into the future. Charging appropriate fees lessens subsidies and increases overall resources to provide general services to the public.
ATTACHMENT(S)
A. Resolution – User Fee Update 2026
B. RCS-Santa Maria Fee Study Update Report