TO:Andrew P. Powers, City Manager
FROM:Jaime Boscarino, Finance Director
DATE:March 14, 2023
SUBJECT: 2023 Citywide User Fees, Fines, Penalties, Rates, and Assessments (User Fees), and Development Impact Fees
RECOMMENDATION:
1. Receive information on User Fees and Development Impact Fees as presented at the Public Study Session and provide direction to staff.
2. Schedule a Public Hearing for April 25, 2023, to establish User Fees and Development Impact Fees to be effective July 1, 2023.
3. Find that this action is not a project as defined under the California Environmental Quality Act (CEQA).
FINANCIAL IMPACT:
Financial Impact to be Determined. The current financial impact of the fee adjustments outlined in the 2023 Proposed User Fee Manual will be included in the Proposed FY 2023-24 and FY 2024-25 Operating Budget.
Consistent with past User Fee updates, selected Community Development Department (CDD) Building and Safety and Planning fees and Public Works Department (PW) Engineering fees are recommended to be adjusted by the Department of Labor’s (DOL) Consumer Price Index (CPI) Los Angeles-Long Beach-Anaheim, December 2020 - December 2022 factor, of 11.82 percent. This enables User Fees to not fall further behind full cost recovery.
Consistent with past User Fee updates, non-development related fees (City Clerk, Citywide, Community Development, Cultural Affairs, Finance, Library, Police, and Public Works) are recommended to be adjusted if there was a change in service level or cost of staff time and materials in an effort to pursue full cost recovery. Non-development related fees have been maintained at their current rates, revised to current competitive market rates, or increased by the DOL’s CPI
2023 Citywide User Fees, Fines, Penalties, Rates, and Assessments (User Fees), and Development Impact Fees
March 14, 2023
5 5
7 Los Angeles-Long Beach-Anaheim, December 2020-December 2022, factor of
11.82 percent. This enables User Fees to not fall further behind full cost recovery.
Per Resolution 2021-012, Traffic Mitigation Impact Fees are proposed to be adjusted by the Construction Cost Index (CCI), Los Angeles, December 2020 - December 2022, factor of 23.92 percent. This reflects the increased costs the City incurs on construction projects that the Traffic Mitigation Impact Fees fund.
Per Resolution 2021-013, Police Facilities Fee is proposed to be adjusted by 1.47 percent, which is based on the City’s average investment returns over the past five years.
BACKGROUND:
Taxes vs. Fees: Local governments establish fees that are charged to users to offset the cost of providing government services. Fees are different than taxes. Proposition 26 was approved by voters on November 2, 2010, and is a constitutional amendment that introduced a definition of what constitutes a local tax. Proposition 26 broadened the definition of a local tax to mean any “levy, charge, or exaction of any kind” imposed by a local government and paid by taxpayers. The Proposition 26 definition of a tax encompasses almost any requirement imposed by a local government that results in the local government receiving revenues. Therefore, the local government is legally required to obtain a majority approval of the voters if the revenues are to be used for general governmental purposes, or a two-thirds voter approval if the revenues are to be used for a specific purpose. In contrast, a fee may be adopted by a majority vote of City Council. The definition of a local tax is tempered by seven exceptions set forth in Proposition 26:
1) Special Benefit or Privilege Exception
2) Government Service or Product Exception
3) True Regulatory Charges (Licenses and Permits) Exception 4) User Charges (Local Government Property) Exception
5) Fines and Penalties Exception
6) Developer Charges (Property Development) Exception
7) Benefit Assessments and Property-Related Charges (Prop. 218) Exception Staff has reviewed each fee and documented the Proposition 26 Exception on each detailed user fee sheet.
The general distinction between fees and taxes is that fees are imposed to a specific fee payer in return for a specific service provided or benefit delivered, while taxes are paid to fund a general benefit to residents of the entire City. Through a 2023 Citywide User Fees, Fines, Penalties, Rates, and Assessments (User Fees), and Development Impact Fees
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7 fee structure, a government can only recover the costs of the service provided.
Additional revenue cannot be generated from the user fees, nor should fees be unintentionally subsidized by other revenue sources.
Comprehensive Cost Studies: The amounts charged for fees must be reasonable and not arbitrary. The City ensures its User Fees meet this requirement through periodic comprehensive cost of service studies. A cost of service study takes into consideration the fact that laws, operating costs, staffing levels, technology, and activity levels can substantially change over time. A full cost of services study for CDD Planning and Code Compliance fees and PW Engineering fees was conducted in FY 2020-21 and included in the current FYs 2021-2023 User Fees. Although a full cost of services study for CDD Building and Safety fees was last conducted in FY 2012-13, due to the recent implementation of the new land management system, staff has postponed the CDD Building and Safety fees cost of services study to FY 2024-25, in order to more accurately reflect staff’s time and effort of processing building and safety-related services utilizing the new streamlined system.
Other User Fees: For non-development related User Fees, staff began reviewing and updating the fees in December 2022. These fees cover services provided by the following departments: City Clerk, Community Development, Cultural Affairs, Finance, Library, Police, and Public Works, as well as overall citywide fees.
Budget Process: As part of the biennial budget process, City staff reviews and updates User Fees as needed based on the estimated cost of providing services. This helps guide the development of revenue budget projections included in the final budget. The last comprehensive review was completed as part of the FYs 2021-2023 budget process and adopted by City Council on April 27, 2021.
City Council Finance/Audit Committee: The City Council Finance/Audit Committee (Committee) was established in 2008 in order to comply with Statement on Auditing Standards (SAS) 114 and to promote additional financial transparency. The Committee provides a forum for open communication between the City’s external auditors and City Council. Staff meets periodically with the Committee to provide updates on the City’s budget and financial status, as well as to receive input from the Committee on financial strategies. Staff presented the proposed User Fees and Development Impact Fees to the Committee on March 9, 2023.
Consumer Price Index (CPI) Factor: Staff referred to the DOL, Bureau of Labor Statistics, and calculated the change in CPI from December 2020 to December 2022 at an 11.82 percent increase for selected user fees. The CPI selected was 2023 Citywide User Fees, Fines, Penalties, Rates, and Assessments (User Fees), and Development Impact Fees
March 14, 2023
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7 for all expenditure categories for Los Angeles-Long Beach-Anaheim, CA, which is the closest in proximity to Ventura County. This is the standard CPI the City utilizes.
Per Resolution 2012-012, the Traffic Mitigation Impact Fees are proposed to be adjusted by the Construction Cost Index (CCI), Los Angeles, December 2020 - December 2022, a factor of 23.92 percent. Per Resolution 2021-013, the Police Facilities Fee is proposed to be adjusted by 1.47 percent, which is based on the City’s average investment returns over the last five years.
DISCUSSION/ANALYSIS:
City Council Policy and State Law: The City has a long-standing commitment to fiscal sustainability. A core tenet of long-term fiscal sustainability is ensuring fee revenue covers the cost of City-provided services to a private individual, business, or group. The User Fee program covers a range of items from False Alarms to Special Use Permits. City Council’s policy is to adjust fees biennially with the goal of achieving “Full-Cost Recovery.” The cost of providing these services includes the cost of personnel, materials, and overhead. If a fee does not cover the cost of providing the service, it is subsidized by tax revenues, which reduces revenues available for other City provided services such as public safety and street maintenance. Thus, the general taxpayer is subsidizing the private benefit an individual, group, or business receives from the City provided service.
The City complies with State Law and the State Constitution for establishing and adjusting fees to ensure the amount charged for a particular user fee does not exceed the City’s cost of providing the fee or service. Every fee has been reviewed, and departments have made reasonable recommendations on adjusting fees to ensure compliance with the law and the City Council’s goal of achieving full-cost recovery. Selected development-related user fees are recommended to increase by CPI in order to not fall further behind full-cost recovery and minimize the potential for services being subsidized by taxpayer revenue. Development-related user fees that are deposit and time and materials based are not recommended to be adjusted by CPI due to the fact that the user will pay actual costs.
User Fee Manual: The Proposed User Fee Manual is available under separate cover and available for review by contacting the City’s Finance Department at [email protected] or on the City’s website at www.toaks.org/userfees. The Manual has two sections; the first section contains the detail sheet for each fee and the second section is a comparison of the 2021 Approved User Fees (adopted on April 27, 2021) and the 2023 Proposed User Fees. The Proposed User Fees for FYs 2023-25 are comprised of 261 fees, with a majority having sub- components, totaling approximately 660 fee items.
2023 Citywide User Fees, Fines, Penalties, Rates, and Assessments (User Fees), and Development Impact Fees
March 14, 2023
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7 A summary of the User Fee are as follows:
Division Total #
of Fees
No Change
in Fee
Increase
in Fee
Decrease
in Fee
# of
New
Fees
# of
Deleted
Fees
New & Deleted Fee Descriptions
City Clerk 4 4 - - - - None
Citywide 13 11 1 - 1 1 CW-09A – Various City-Owned Locations (Added)
CW-07 Cameron Center (Deleted)
CDD-Building 27 11 16 - - - None
CDD-Planning 73 42 27 3 1 - P-17C Review & Processing of SB9 Applications (Added)
Cultural Affairs 50 39 8 - 3 - CA-13B VIP Event Creations (Added) CA-13C Box Office Agent Services(Added)
CA-41 E-Blast Service Fee (Added)
Finance 13 8 4 - 1 - F-17 TEFRA Hearing Fee (Added)
Library 7 7 - - - - None
Police 6 4 2 - - 1 LE-07 Illegal Fireworks (Deleted)
Public Works 68 24 39 3 2 1 PW-06G Encroachment Permit – Utility Companies (Added)
PW-67 FEMA Flood Plain Permit (Added)
PW-65 EV Charging Fee (Deleted)
Total 261 150 97 6 8 3
City Council Exceptions (Exceptions to Full-Cost Recovery): In prior reviews of the City's User Fees, City Council elected to intentionally set certain fees below “Full-Cost Recovery.” The exceptions are primarily focused on fees paid by existing homeowners where charging the full cost of the fee would place a large burden on the homeowner. The list of City Council Exceptions is included as Attachment #1. The Exception list from 2021 consisted of 14 fees.
Non-Compliance Fees: Non-Compliance Planning and Engineering fees are charged when an applicant engages in work without City-required permits or approvals. Non-Compliance fees were discussed at the 2013 User Fee Study Session and City Council directed staff to include these fees in the User Fee Manual. These fees reflect the penalty by either doubling the proposed fee or the fee’s full-cost recovery, whichever is less. In no case does the fee exceed full-cost recovery. The Non-Compliance fees are included in the separately attached User Fee manual.
Development-Related Fees: Development-related fees include CDD Planning, CDD Building and Safety fees, and PW Engineering fees. In years where a full cost of services study is not performed, the City has historically increased selected fees by CPI. Fees that are based on actual time and materials, fees where a deposit is taken, and those fees listed as Homeowner’s Exceptions will remain the same. Staff recommends selected development-related fees are increased by the
11.82 percent CPI factor to not fall further behind in achieving full cost recovery. 2023 Citywide User Fees, Fines, Penalties, Rates, and Assessments (User Fees), and Development Impact Fees
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7 1. Community Development (Building & Safety). Eleven fees are recommended to remain the same because they are time and materials, deposit, or are one of the fees on the Homeowner’s Exceptions list and 16 fees are recommended to be increased by CPI.
2. Community Development (Planning & Code Compliance). Thirty-three fees are recommended to remain the same because they are time and materials, deposit, or are one of the fees on the Homeowner’s Exceptions list and 24 fees are recommended to be increased by CPI. Three fees are recommended to decrease: P-37: Underground Utility Waiver; P-38: Sign Permits; and P-69:
Affordable Housing Agreement due to changes in service. There is one new fee, P-17C: Review & Processing of SB9 Applications.
3. Public Works. Fifteen Public Works fees are recommended to remain the same because they are time and material, deposit based, or there was no change in service levels and 32 fees are recommended to be increased by CPI. Two fees are recommended to decrease, which include PW-25: Appeal of Administrative or Traffic & Transportation Commission Decision and PW-52: Traffic Study Fee, which moves from a Deposit fee type to a Fixed Fee. There are two new fees recommended to be added: PW-06G: Encroachment Permit – Utility Companies (Annual) and PW-67: FEMA Flood Plain Permit fees.
Non-Development Related User Fees: For non-development related User Fees, staff reviewed each fee and either maintained the current fee, adjusted it due to a change in service levels, updated change in time and materials, or adjusted based on 11.82 percent CPI factor.
1. City Clerk. Review of the City Clerk fees resulted in no recommended changes. Fees are minimal in nature or based on time and materials.
2. Citywide. Eleven citywide fees are recommended to remain the same as the majority are facility rental fees. One fee CW-09: City Facility Rental – Municipal Service Center (MSC) is recommended to increase for Group 3. A new fee, CW- 9A: City Facility Rental – Various City-Owned Locations was added to the User Fee manual.
3. Community Development (Planning & Code Compliance). Of the 12 non- development related fees, nine are recommended to stay the same because they are time and materials, deposit, or are one of the fees on the Homeowner’s Exceptions list and three fees are recommended to be increased by CPI. Examples of non-development Community Development fees include Animal Control Fees and Application Fee for “Community Event” designation. 2023 Citywide User Fees, Fines, Penalties, Rates, and Assessments (User Fees), and Development Impact Fees
March 14, 2023
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7 4. Cultural Affairs. Thirty-nine Cultural Affairs fees are recommended to remain the same in order to remain competitive with other facilities. Eight fees are recommended to be increased: CA-22: Labor Technical Services; CA-23: Labor – Front of House; CA-24: Labor – Front of House Ambassadors; CA-25: Labor – Front of House – Founders Room, Lobbies, Plaza; CA-27: Labor – Custodian; CA- 30: Production Fee – Piano Tuning; CA-38: Misc. Fees – Merchandise Sales; and CA-39: Misc. Fees – Parking Fees. Most of these fees have not been increased in several years, despite City costs to provide these services experiencing increases. Three new fees are recommended to be added: CA-13B – VIP Event Creations; CA-13C – Box Office Agent Services; and CA-41: E-Blast Service Fee.
5. Finance. Eight fees are recommended to stay the same. Four fees are recommended to increase: F-05A: New Business Tax Certificate Processing; F- 05B: Business Tax Certificate Renewal Processing; F-06B: Parking Citation Issuances; and F-06C: Parking Citation Cancellation Fee. One new fee is recommended to be added this year, F-17: Tax Equity and Fiscal Responsibility Act (TEFRA) Hearing Fee. The City has been providing this service free of charge and it is recommended a fee be established.
6. Library. Review of the Library fees resulted in no recommended changes. The fees are minimal in nature.
7. Police. Two fees are recommended to be increased due to changes in cost of service, LE-03: Emergency Response Restitution and LE-06: Noise/Loud Party Response. One fee is recommended to be deleted, LE-07: Illegal Fireworks as the City does not have an illegal fireworks ordinance and follows the County’s ordinance.
8. Public Works. There are 17 Public Works non-development related fees; nine are recommended to remain the same because they are based on time and materials or a deposit, and seven are recommended to be increased by CPI. One fee, PW-51: Thousand Oaks Transit (TOT) Bus Fare, decreased one sub-fee from $56 to $50 for the Adult – Unlimited Ride Pass.
Development Impact Fees: Development Impact Fees include fees charged to new development for public capital improvements and are subject to the Mitigation Fee Act. The fee is based on the developer’s fair share, based on the impact the development places on the City’s current infrastructure. These fees include Road and Traffic Fees, Police Facilities Fee, and Water and Wastewater Plant Improvement and Connection Fees.
2023 Citywide User Fees, Fines, Penalties, Rates, and Assessments (User Fees), and Development Impact Fees
March 14, 2023
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7 1. Road and Traffic Fees. The City last approved a Traffic Mitigation and Impact Fee Study on April 23, 2019. Six payback fees, previously established and amended by various City Council resolutions, will continue to be imposed on land development projects to pay their fair share of road improvements previously constructed by the City. Per Resolution 2012-012, these Impact Fees allow for biennial adjustment due to increased costs of construction based on the CCI for Los Angeles from December 2020 to December 2022. Staff recommends that the fees be increased by 23.92 percent in accordance with the CCI (Attachment #2).
2. Police Facilities Fee. This fee reimburses the City for advancing funds for the construction of the East Valley Law Enforcement Facility. Per Resolution 2021- 013, this fee is adjusted based on the City’s average investment returns over the past five years. Staff recommends that the fees be increased by 1.47 percent.
3. Water and Wastewater Plant Improvement and Connection Fees. These fees are adopted by resolution. The most recent fee update was approved by City Council in December 2021 and will be included in the Adopted User Fee manual for reference.
Schedule for Adoption: At the conclusion of the Public Study Session, staff recommends City Council give direction on the proposed fee adjustments, as well as schedule a Notice of Public Hearing for Tuesday, April 25, 2023.
At the Public Hearing, a resolution will be presented to City Council to adopt the User Fees as contained in the FY 2023 User Fee Manual; and a resolution for the adjustment of the Traffic Mitigation Impact and Police Facilities Fees.
COUNCIL GOAL COMPLIANCE:
Meets the following City Council goal:
C. Operate City government in a fiscally and managerially responsible and prudent manner to ensure that the City of Thousand Oaks remains one of California's most desirable places to live, work, visit, recreate, and raise a family.
PREPARED BY: Brent Sakaida, Budget Officer
Ryan Roman, Assistant Analyst
Attachments:
Attachment #1 – City Council “Full Cost” Exceptions
Attachment #2 – Traffic Mitigation Impact Fees
Document Provided Under Separate Cover:
#1 – Draft 2023 User Fee Manual (FYs 2023-24 & 2024-25) FIN:390-10\bs\H:\COMMON\Council\2023\Administration\03142023 User Fee Report Study Session.docx