CITY COUNCIL AGENDA SPECIAL MEETING CITY OF HALF MOON BAY TUESDAY, MAY 16, :00 PM

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1 CITY COUNCIL AGENDA SPECIAL MEETING CITY OF HALF MOON BAY TUESDAY, MAY 16, 2017 Adcock Community/Senior Center 535 Kelly Avenue Half Moon Bay, California Debbie Ruddock, Mayor Deborah Penrose, Vice Mayor Adam Eisen, Councilmember Rick Kowalczyk, Councilmember Harvey Rarback, Councilmember 5:00 PM This agenda contains a brief description of each item to be considered. Those wishing to address the City Council on any matter not listed on the Agenda, but within the jurisdiction of the City Council to resolve, may come forward to the podium during the Public Forum portion of the Agenda and will have a maximum of three minutes to discuss their item. Those wishing to speak on a Public Hearing matter will be called forward at the appropriate time during the Public Hearing consideration. Please Note: Please Provide a Copy of Prepared Presentations to the City Clerk Copies of written documentation relating to each item of business on the Agenda are on file in the Office of the City Clerk at City Hall and the Half Moon Bay Library where they are available for public inspection. If requested, the agenda shall be available in appropriate alternative formats to persons with a disability, as required by Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Sec ) Information may be obtained by calling In compliance with the Americans with Disabilities Act, special assistance for participation in this meeting can be obtained by contacting the City Clerk s Office at A 48-hour notification will enable the City to make reasonable accommodations to ensure accessibility to this meeting (28 CFR ADA Title II). MEETING WILL CONCLUDE BY 11:00 PM UNLESS OTHERWISE EXTENDED BY COUNCIL VOTE 1

2 CONVENE SPECIAL MEETING CLOSED SESSION CONFERENCE WITH LEGAL COUNSEL ANTICIPATED LITIGATION Significant exposure to litigation pursuant to paragraph (2) or (3) of subdivision (d) of Section : (1 potential case) (In addition to the information noticed above, the agency may be required to provide additional information on the agenda or in an oral statement prior to the closed session pursuant to paragraphs (2) to (5), inclusive, of subdivision (e) of Section ) 1. ORDINANCES AND PUBLIC HEARINGS 1.A. ADJUSTMENTS TO THE COST OF SERVICES SCHEDULE (USER FEES) STAFF REPORT ATTACHMENT 1 ATTACHMENT 2 ATTACHMENT 3 ATTACHMENT 4 ATTACHMENT 5 CLOSED SESSION CONFERENCE WITH LEGAL COUNSEL EXISTING LITIGATION (Paragraph (1) of subdivision (d) of Section ) Names of cases: 1. Siobhan Smith v. ADJOURNMENT 2

3 BUSINESS OF THE COUNCIL OF THE CITY OF HALF MOON BAY For meeting of: May 16, 2017 AGENDA REPORT TO: VIA: FROM: TITLE: Honorable Mayor and City Council Magda Gonzalez, City Manager Yulia Carter, Finance Director ADJUSTMENTS TO THE COST OF SERVICES SCHEDULE (USER FEES) RECOMMENDATION: 1. Review results of the comprehensive User Fee study and proposed fee schedule; 2. Conduct a public hearing and adopt the attached resolution authorizing adjustments to the Cost of Services Schedule (User Fees) for Fiscal Year , as proposed in Attachment 1;, and 3. Adopt a policy guideline for future annual cost of services increases based on the San Francisco Oakland San Jose (Bay Area) Urban Wage Earners and Clerical Workers Consumer Price Index (CPI W). FISCAL IMPACT: The proposed fee schedule, if adopted, would result in a net annual increase to the General Fund revenue of approximately $405,300 based on current activity levels as presented in this report. Implementation of the new fees would be effective July 16, A minimum 60 day notice is required for the user fees in accordance with California Government Code Section STRATEGIC ELEMENT: This recommendation supports the Fiscal Sustainability and Inclusive Governance Elements of the Strategic Plan. BACKGROUND: Municipal best practice guidelines state that staff should review the costs of providing fee related services in conjunction with development of the annual operating budget. A user fee and cost allocation model should be used as a basis for this review to ensure that the City of Half Moon Bay is utilizing comprehensive overhead rates and accurately accounting for the true cost of providing various programs and services within City operations. The last comprehensive cost of services study was performed in FY by Maximus, calling for a need for a new study. In June, 2014, the City released an RFP for services related to an overhead cost allocation and comprehensive rate and fee study. 3

4 On August 19, 2014 the City Council awarded a contract to NBS Government Finance Group (NBS) to prepare a Cost Allocation Plan, Development Impact Fees (DIF) nexus study, and a Comprehensive Fee Study. The scope of the study included a comprehensive analysis of the total cost of providing services, including all applicable direct, indirect, and overhead costs associated with individual development related services (planning, building, public works, and administration). The first part of this project, the overhead Cost Allocation Plan (CAP) model was developed by NBS in March Staff incorporated appropriate and defensible general and administrative cost allocations into the FY budget, and later updated the same for FY The purpose of the CAP implementation is to ensure that the City is accurately accounting for the true cost of providing various programs and services within its operations and maximizing recovery of General Fund indirect costs from identified operating departments, as well as from enterprise and other chargeable funds and projects. The CAP model serves as the backbone for the overall cost of services analysis, as it is the City s goal to identify overhead rates that can be used in the calculation of billable hourly rates for grants, fees, federal reimbursements, and other billings; and develop charges for user fees that comply with Proposition 218. A major goal of the user fee study was to build a model to allow the City to move closer to a full cost recovery when setting user fees. The second part of the project included conducting a Development Impact Fee nexus study to review development impact mitigation fees imposed on new development, including capital outlay and park facilities, traffic mitigation, sewer connection and storm drainage fees. This study was sub contracted by NBS to Michael Baker International and was presented to Council on November 17, Following the Government Code and public hearing requirements the new development fees went into effect in January, The final stage of the project includes review of the City s cost of services schedule (user fees) to provide staff with a baseline for recommended revisions to the current fee schedule, which is the subject for today s discussion. Included in the study, a benchmark comparison of the City s fees was conducted to measure the market consistency of the City s service charges. This analysis showed that there is a wide variety of service schedules and pricing methodology used by different municipalities, which makes comparisons difficult. However, the methodologies used to calculate the fees are consistent with those used among neighboring cities. NBS presented preliminary results of the user fee study to the Finance Committee on May 8, The Committee recommended bringing results of the study the City Council as a public hearing to satisfy the Government Code requirements. The committee also discussed building in a legally defensible increase into the recommended fees to reflect the anticipated increases in the FY budget compared to the FY Adopted budget, which was used as a basis of the study. Staff has prepared a master fee schedule that factors the most recent CPI increase of 3.3% (February 2017) to the consultant recommended fees to arrive at the staff recommended user fees (Attachment 5). 4

5 DISCUSSION: Conducting a comprehensive user fee study is not an annual requirement and only becomes valuable following significant shifts in the organization, local practices, legislative values or changes in legal requirements. Even if the City chooses to adjust fees automatically on an annual basis, certain fees can still be adjusted above or below the average rate at the Council s direction. The full cost of services adjusted by CPI would be the City s only limit in setting its fees. There are some exceptions to the Fee Schedule that do not lend themselves to strict analysis of cost recovery. These exceptions are fees that are limited or set by statute, fines and penalties. The examples of fees with a legal limit include the service charge on checks returned for nonsufficient funds, or vehicle repossession release fee that is established and mandated by the State. Based on the results of the cost allocation plan (CAP) and individual and group meetings with each City department, the resulting report provides a calculation of the percentage of cost recovery currently attained for each service. This information provides staff and Council with a baseline for recommended revisions to the current fee schedule. A complete report of the User Fee Study prepared by NBS is included in Attachment 2 to the staff report and provides the objectives, approach and methodology of the study, as well as specific details and analysis, including cost recovery of the City s Planning, Building, Public Works, Police, and Administrative activities. As part of this project, staff took the opportunity to clean up and consolidate redundant and rarely used fees, like duplication of documents available online, etc. While the majority of the fees show an increase, the study also identified 85 fees which will be lowered, which have also been incorporated in the Master Fee Schedule (Attachment 5). Department Recommended Fees Decreasing from Current Fee Recommended Fees Increasing over Current Fee Administration 1 19 Planning Public Works 4 66 Building Public Safety 7 23 Total As shown in the table below, the City is currently recovering approximately 56% of the costs associated with providing user and regulatory fee related services. At the recommended level, the City will recover approximately 99% of the costs, which would translate into $405,300 in additional revenues based on prior year activity level. If the Council chose to add the 3.3% CPI W increase to these recommended fees, this would bring an additional $30,800. Should the Council decide to adopt a policy of 100% recovery for all fees included in the report, approximately $14,000 in additional costs could be recovered. 5

6 Staff recommends setting the fees by using a 100% recovery rate for the majority of City services. The rationale behind this recommendation is that the City should target a full cost recovery for services that provide private benefit (e.g. majority of building and planning services). This assumes that the City s goal should be to maximize revenues from user fees to recover full cost of service, and only offer subsidy for services that provide public benefit (e.g. public safety, children and senior services and activities, etc.). Included in this report are several fee categories that are not being recommended to recover 100% of the cost of providing various services. There are economic, policy and social reasons why staff does not recommend setting all fees at 100% of their cost recovery amount. Staff recommends subsidizing some fees like block party permits, public safety service fees and solar panel permit fees to encourage and alleviate citizens burdens for certain activities. Certain planning fees related to appeals are also proposed to be subsidized to maintain local control. Additional information on city services that are recommended at less than 100% recovery rate can be found in Attachment 3 to this staff report. Parks and Recreation Fees were not originally included in the scope of the user fee study, as these services were provided through a contract with Boys & Girls Club, and the City did not collect nor benefit from revenues associated with these services. In preparation for bringing these services back in house this July, Staff has compiled a schedule of Parks and Recreation Fees previously approved by City Council and/or used by Boys & Girls Club (Attachment 4). Staff recommends that these fees remain unchanged and be included in the City s master fee schedule at this time to ensure easy transition and continuity of Parks & Recreation services provided to the community. Staff also recommends a comprehensive review of these fees in about a 6 12 months after the new Parks and Recreation program is established and fully functional. 6

7 Staff also recommends that the Council adopt the guidelines to adjust most fees annually based on the San Francisco Oakland San Jose (Bay Area) Urban Wage Earners and Clerical Workers Consumer Price Index (CPI W). As noted previously, conducting a comprehensive user fee study becomes valuable when following significant shifts in the organization, local practices or legal requirement changes. Even if the Council chooses to adjust fees automatically on an annual basis, certain fees can still be adjusted above or below the average rate at the Council s discretion within the full cost of services limits increased by CPI. Staff also recommends that the City follows best practices of performing a comprehensive cost allocation and user fee study every five years to ensure that the current fee structure is thoroughly studied and reviewed on a regular basis. ATTACHMENTS: 1. Resolution authorizing adjustments to the City s Cost of Services Schedule 2. Comprehensive User Fee Study Report 3. Fees recommended at less than 100% recovery level 4. Parks and Recreation Fees 5. Master Fee Schedule 7

8 RESOLUTION NO. C 2016 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HALF MOON BAY AUTHORIZING ADJUSTMENTS TO THE COST OF SERVICES SCHEDULE (USER FEES) FOR FISCAL YEAR WHEREAS, the City Council of the has established certain fees for City services; and WHEREAS, the City Council awarded a contract to NBS Government Finance Group (NBS) to complete the Cost Allocation Plan and Comprehensive User Fee Study; and WHEREAS, the proposed budget is a balanced expenditure plan that ensures the maintenance of adequate reserves during FY ; and WHEREAS, the wishes to use the San Francisco Oakland San Jose (Bay Area) Urban Wage Earners and Clerical Workers Consumer Price Index (CPI W) as a guideline for future annual increases. NOW THEREFORE, the City Council of the does hereby resolve that the amended fees as presented in the Comprehensive User Fee Study, raised by the most recent (February, 2017) CPI W increase of 3.3 percent as shown in the attached Master Fee Schedule, are hereby approved and effective July 16, ******************************************************************** I, the undersigned, hereby certify that the foregoing Resolution was duly passed and adopted on the 16 th day of May, 2017 by the City Council of Half Moon Bay by the following vote: AYES, Councilmembers: NOES, Councilmembers: ABSENT, Councilmembers: ABSTAIN, Councilmembers: ATTEST: Jessica Blair, City Clerk APPROVED: Debbie Ruddock, Mayor 8

9 Citywide User Fee Study Final Report April 24, Temecula Parkway, Suite 100 Temecula, CA Toll free: Fax:

10 TABLE OF CONTENTS Executive Summary... 1 Outcomes... 1 Report Format... 2 Section 1 Introduction and Fundamentals... 3 Scope of Study... 3 Methods of Analysis... 4 Cost of Service Analysis... 4 Fee Establishment... 6 Cost Recovery Evaluation... 6 Comparative Fee Survey... 8 Data Sources... 8 Section 2 Administrative Fees...10 Cost of Service Analysis Fee Establishment Cost Recovery Evaluation Section 3 Planning Fees...12 Cost of Service Analysis Fee Establishment Cost Recovery Evaluation Section 4 Public Works (Engineering) Fees...15 Cost of Service Analysis Fee Establishment Cost Recovery Evaluation Section 5 Building Fees...17 Cost of Service Analysis Fee Establishment Cost Recovery Evaluation Section 6 Police Fees...19 Cost of Service Analysis Fee Establishment Cost Recovery Evaluation Section 7 Technology Fee...21 Cost of Service Analysis Citywide User Fee Study Prepared by NBS TOC 10

11 Fee Establishment Cost Recovery Evaluation Section 8 Conclusion...23 Appendices Cost of Service Analysis (Fee Tables) Administrative Departments Fees Appendix A.1 Planning Division Fees Appendix A.2 Public Works (Engineering) Fees Appendix A.3 Building and Safety Fees Appendix A.4 Police Department Fees Appendix A.5 Comparative Fee Survey Administrative Departments Fees Appendix B.1 Planning Division Fees Appendix B.2 Public Works (Engineering) Fees Appendix B.3 Building and Safety Fees Appendix B.4 Police Department Fees Appendix B.5 Citywide User Fee Study Prepared by NBS TOC 11

12 Executive Summary NBS performed a User Fees and Charges Study (Study) for the (City). The purpose of this report is to describe the Study s findings and recommendations, which intend to defensibly update and establish user and regulatory fees for service for the, California. California cities impose user fees and regulatory fees for services and activities they provide through provisions of the State Constitution. First, cities may perform broad activities related to their local policing power and other service authority as defined in Article XI, Sections 7 and 9. Second, cities may establish fees for service through the framework defined in Article XIIIC, Section 1. Under this latter framework, a fee may not exceed the estimated reasonable cost of providing the service or performing the activity. For a fee to qualify as such, it must relate to a service or activity under the control of the individual/entity on which the fee is imposed. For example, the individual/entity requests service of the municipality or his or her actions specifically cause the municipality to perform additional activities. In this manner, the service or the underlying action causing the municipality to perform service is either discretionary and/or is subject to regulation. As a discretionary service or regulatory activity, the user fees and regulatory fees considered in this Study fall outside requirements for imposition of taxes, special taxes, or fees imposed as incidences of property ownership. The City s chief purposes in conducting this Study were to ensure that existing fees do not exceed the costs of service and to provide an opportunity for the City Council to re-align fee amounts with the adopted cost recovery policies. Outcomes This Study examined user and regulatory fees managed by the following City departments and programs: Administrative departments such as City Manager, City Clerk, and Finance Community development departments, including, Planning, Public Works, and Building Police The Study identified approximately $528,000 currently collected per year from fees for service, versus $947,000 of eligible costs for recovery from fees for service. The following table provides a summary of results for each service area studied: Department / Division Administrative Departments Estimated Annual Current Fee Revenue Estimated Annual Full Cost Recovery Fee Revenue Annual Cost Recovery Surplus / (Deficit) Current Cost Recovery % Estimated Annual Recommended Fee Revenue Recommended Cost Recovery % $ 14,385 $ 30,983 $ (16,598) 46% $ 30, % Planning $ 100,080 $ 313,387 $ (213,307) 32% $ 305,561 98% Public Works (Engineering) $ 23,800 $ 144,227 $ (120,427) 17% $ 144, % Building $ 373,616 $ 365,897 $ 7, % $ 365, % Police $ 16,467 $ 23,178 $ (6,711) 71% $ 17,430 75% Technology Fee $ - $ 69,571 $ (69,571) 0% $ 69, % Total $ 528,348 $ 947,244 $ (418,897) 56% $ 933,671 99% Citywide User Fee Study 1 Prepared by NBS 12

13 As shown, the City is recovering approximately 56% of costs associated with providing user and regulatory fee related services. Should the Council elect to adopt fee levels at 100% of the full cost recovery amounts determined by this Study, an additional $419,000 in costs could be recovered. However, as discussed in Section 1 of this report, there are reasons for adopting a fee at less than the calculated full cost recovery amount. As such, City staff provided initial recommended fee amounts for the Council s consideration. If Council elects to adopt fee levels at staff s initial recommendations, an additional $405,000 in costs could be recovered, or a 99% cost recovery outcome for services provided. Report Format This report documents analytical methods and data sources used throughout the Study, presents findings regarding current levels of cost recovery achieved from user and regulatory fees, discusses recommended fee amounts, and provides a comparative survey of fees imposed by neighboring agencies for similar services. Section 1 of the report outlines the foundation of the Study and general approach. Sections 2 through 7 discuss the results of the cost of service analysis performed, segmented by category of fee and/or department. The analysis applied to each category/department falls into studies of: the fully burdened costs of providing service, establishment of fee categories and amounts, evaluation of current cost recovery levels, and the recommended fees for providing services. Section 8 provides the grand scope conclusions of the analysis provided in the preceding sections. Appendices to this report include additional analytical details for each department or division studied, and a comparison of fees imposed by neighboring agencies for similar services. An updated Master Fee Schedule document will accompany the City s Staff Report. Citywide User Fee Study 2 Prepared by NBS 13

14 Section 1 Introduction and Fundamentals Scope of Study The following is a summarized list of fees for each City department or program studied: Administrative fees, including: o Returned checks o Copies and duplication requests o Election filing fees o Hourly rates for staff research requests o Alarm permits o Special event permits o Annual parking permit processing for Poplar Beach Planning fees, including: o Pre-entitlement processing o Coastal development permits o Environmental review o Design review o Entitlement processing and appeals Public Works fees, including: o Improvements within the right-of-way o Final map review and approval o Grading review and inspection o Encroachment permits Building and Safety permits Police permits for miscellaneous records requests, etc. The fees examined in this Study specifically excluded utility rates, development impact fees, and special assessments, all of which fall under distinct analytical and procedural requirements different from the body of user/regulatory fees analyzed in this effort. Additionally, this Study excluded facility and equipment rental rates, as well as most of the fines and penalties that may be imposed by the City for violations to its requirements or code. (The City is not limited to the costs of service when charging for entrance to or use of government property, or when imposing fines and penalties.) Citywide User Fee Study 3 Prepared by NBS 14

15 Methods of Analysis There are three phases of analysis completed for each City department or program studied: 1) Cost of service analysis 2) Fee establishment 3) Cost recovery evaluation Cost of Service Analysis A cost of service analysis is a quantitative effort that compiles the full cost of providing governmental services and activities. There are two primary types of costs considered: direct and indirect costs. Direct costs are those that specifically relate to the activity in question, including the real-time provision of the service. Indirect costs are those that support provision of services in general, but cannot be directly assigned to the fee for service in question. Components of the full cost of service include direct labor costs, indirect labor costs, specific direct non-labor costs where applicable, allocated non-labor costs, and allocated City-wide overhead. Definitions of these cost components are as follows: Labor costs Salary, wages and benefits expenses for City personnel specifically involved in the provision of services and activities to the public. Indirect labor costs Personnel expenses supporting the provision of services and activities. This can include line supervision and departmental management, administrative support within a department, and staff involved in technical activities related to the direct services provided to the public. Specific direct non-labor costs Discrete expenses incurred by the City due to a specific service or activity performed, such as contractor costs, third-party charges, and very specific materials used in the service or activity. (In most fee types, this component is not used, as it is very difficult to directly assign most non-labor costs at the activity level.) Allocated indirect non-labor costs Expenses other than labor for the departments involved in the provision of services. In most cases, these costs are allocated across all services provided by a department, rather than directly assigned to fee categories. Allocated indirect organization-wide overhead These are expenses, both labor and non-labor, related to agency-wide support services. Support services include general administrative services such as City Council, City Manager, City Clerk, City Attorney, Human Resources, Finance, and Information Services, as well as cost burdens for building and equipment use and maintenance. An agency s support services departments assist the direct providers of public service. The amount of costs attributable to each department or program included in this Study were sourced from a separate Cost Allocation Plan, prepared by NBS. All cost components in this Study use annual (or annualized) figures, representing a twelve-month cycle of expenses incurred by the City in the provision of all services and activities agency-wide. Nearly all of the fees under review in this Study require specific actions on the part of City staff to provide the service or conduct the activity. Because labor is the primary underlying factor in these activities, the Study expresses the Citywide User Fee Study 4 Prepared by NBS 15

16 full cost of service as a fully burdened cost per labor hour. NBS calculates a composite, fully burdened, hourly rate for each department, division, program, or activity, as applicable to the specific organization and needs of each area studied. The rate serves as the basis for further quantifying the average full cost of providing individual services and activities. Deriving the fully burdened labor rate for each department, and various functional divisions within a department, requires two figures: the full costs of service and the number of hours available to perform those services. The full costs of service are quantified through the earlier steps described in this analysis. NBS derives the hours available from a complete listing of all personnel employed by the City. A full-time employee equates to 2,080 hours per year of regular time. Using this as an initial benchmark of labor time, the Study removes the average employee s eligible annual leave from the total number of regular paid hours to generate the total number of available labor hours for each City department or program. These available hours represent the amount of productive time available for providing both fee-recoverable and non-fee recoverable services and activities. The productive labor hours divided into the annual full costs of service equals the composite fully burdened labor rate. Some agencies also use the resulting rates for other purposes than setting fees, such as when the need arises to calculate the full cost of general services, or structure a cost recovery agreement with another agency or third party. Fully burdened labor rates applied at the individual fee level estimate an average full cost of providing each service or activity. This step required the development of staff time estimates for the services and activities listed in the City s fee schedule. In some fee programs, the City s time tracking records were useful in identifying time spent providing general categories of service (e.g. plan review, inspection, public assistance, etc.). However, the City does not systematically track activity service time for all departments or all fee services provided. Consequently, interviews and questionnaires were used to develop the necessary data sets describing estimated labor time. In most cases, City staff estimated the average amount of time (in minutes and hours) it would take to complete a typical occurrence of each service or activity considered. Every attempt was made to ensure that each department having a direct role in the provision of each service or activity provided a time estimate. It should be noted that the development of these time estimates was not a one-step process: estimates received were carefully reviewed by both consultant and departmental management to assess the reasonableness of such estimates. Based on this review, the City reconsidered its time estimates until both parties were comfortable that the fee models reasonably reflected the average service level provided by the City. Then, staff s time estimates were applied to the appropriate fully burdened labor rate to yield an average full cost of the service or activity. The average full cost of service is just that: an average cost at the individual fee level. The City does not currently have the systems in place to impose fees for every service or activity based on the actual amount of time it takes to serve each individual. Moreover, such an approach is almost universally infeasible without significant if not unreasonable investments in costly technology. Much of the City s fee schedule is composed of flat fees, which by definition, are linked to an average cost of service; thus, use of this average cost method is the predominant approach in proceeding toward a schedule of revised fees. Flat fee structures based on average costs of service are widely applied among other California municipalities, and it is a generally accepted approach. (Refer to the subsection below regarding Fee Establishment for further discussion.) Subsequent chapters and the appendices of this report discuss the completed cost of service analysis developed for each department or division. Citywide User Fee Study 5 Prepared by NBS 16

17 Fee Establishment Many of the City s fees are flat fees, meaning they correspond directly to the average full cost of service result. For the few activities where estimating an average was impossible due to the highly variable nature of the service use of fully burdened hourly rates coupled with time tracking is the preferred fee structure. (In other words, the City would impose a fee per hour of staff time, requiring some degree of time estimation or outright time-tracking at the case level.) Establishing fees also includes a range of considerations, as described below: Addition to and deletion of fees The Study s process provided each department the opportunity to propose additions and deletions to their fee schedules, as well as rename, reorganize, and clarify fees imposed. Many such revisions better conform fees to current practices, as well as improve the calculation of fees owed by an individual, the application of said fees, and the collection of revenues. In other words, as staff is more knowledgeable and comfortable working with the fee schedule, the accuracy achieved in both imposing fees on users and collecting revenues for the City is greater. Beyond this, some additions to the fee schedule were simply identification of existing services or activities performed by City staff for which no fee is currently charged. Revision to the structure of fees In most cases, the current structure of fees did not change; the focus is to recalibrate the fee amount to match the costs of service. In several cases, however, fee categories and fee names were simplified or re-structured to increase the likelihood of full cost recovery, or to enhance the fairness of how the fee applies to various types of fee payers. Documentation of tools to calculate special cost recovery The City s fee schedule should include the list of fully burdened rates developed by the Study. Documenting these rates in the fee schedule provides an opportunity for the City Council to approve rates for cost recovery under a time and materials approach. It also provides clear publication of those rates, so fee payers of any uniquely determined fee can reference the amounts. The fee schedule should provide language that supports special forms of cost recovery for activities and services not contemplated by the adopted master fee schedule. These rare instances use the published rates to estimate a flat fee, or bill on an hourly basis, at the discretion of the director of each department. Cost Recovery Evaluation The NBS fee model compares the existing fee for each service or activity to the average full cost of service quantified through this analysis. A cost recovery rate of 0% identifies no current recovery of costs from fee revenues (or insufficient information available for evaluation). A rate of 100% means that the fee currently recovers the full cost of service. A rate between 0% and 100% indicates partial recovery of the full cost of service through fees. A rate greater than 100% means that the fee exceeded the full cost of service. User fees and regulatory fees examined in this Study should not exceed the full cost of service. In other words, the cost recovery rate achieved by a fee should not be greater than 100%. In most cases, imposing a fee above this threshold could require the consensus of the voters. Citywide User Fee Study 6 Prepared by NBS 17

18 NBS also assists with modeling the recommended or targeted level of cost recovery for each fee, always established at 100%, or less, than the calculated full cost of service. Targets and recommendations always reflect agency-specific judgments linked to a variety of factors, such as existing City policies, agency-wide or departmental revenue objectives, economic goals, community values, market conditions, level of demand, and others. A general means of selecting an appropriate cost recovery target is to consider the public and private benefits of the service or activity in question. To what degree does the public at large benefit from the service? To what degree does the individual or entity requesting, requiring, or causing the service benefit? When a service or activity completely benefits the public at large, there is generally little to no recommended fee amount (i.e., 0% cost recovery), reflecting that a truly public-benefit service is best funded by the general resources of the City, such as General Fund revenues (e.g., taxes). Conversely, when a service or activity completely benefits an individual or entity, there is generally closer to or equal to 100% of cost recovery from fees, collected from the individual or entity. An example of a completely private benefit service may be a request for exemption from a City regulation or process. In some cases, a strict public-versus-private benefit judgment may not be sufficient to finalize a cost recovery target. Any of the following other factors and considerations may influence or supplement the public/private benefit perception of a service or activity: If optimizing revenue potential is an overriding goal, is it feasible to recover the full cost of service? Will increasing fees result in non-compliance or public safety problems? Are there desired behaviors or modifications to behaviors of the service population helped or hindered through the degree of pricing for the activities? Does current demand for services support a fee increase without adverse impact to the citizenry served or current revenue levels? (In other words, would fee increases have the unintended consequence of driving away the population served?) Is there a good policy basis for differentiating between type of users (e.g., residents and non-residents, residential and commercial, non-profit entities and business entities)? Are there broader City objectives that inform a less than full cost recovery target from fees, such as economic development goals and local social values? Because this element of the Study is subjective, NBS provides the full cost of service calculation information and the framework for considering fees, while those closest to the fee-paying population the City departments and programs have considered appropriate cost recovery levels at or below that full cost for the Council s review. Citywide User Fee Study 7 Prepared by NBS 18

19 Comparative Fee Survey Often policy makers request a comparison of their jurisdiction s fees to surrounding or similar communities. The purpose of a comparison is to provide a sense of the local market pricing for services, and to use that information to gauge the impact of recommendations for fee adjustments. Appendix B presents the results of the Comparative Fee Survey for the. NBS worked with the City to choose five comparative agencies: Cities of Belmont, Brisbane, Hillsborough, Pacifica, and Woodside. NBS notes the following about the approach to, and use of, comparative survey data: Comparative surveys do not provide information about the cost recovery policies or procedures inherent in each comparison agency. A market based decision to price services below the full cost of service calculation, is the same as making a decision to subsidize that service. Comparative agencies may or may not base their fee amounts on the estimated and reasonable cost of providing services. NBS did not perform the same level of analysis provided for this Study on the comparative agencies fees. Comparative fee survey efforts are often non-conclusive for many fee categories. Comparison agencies typically use varied terminology for provision of similar services. In general, NBS reasonably attempts to source each comparison agency s fee schedule from the Internet, and compile a comparison of the City s existing fee categories and amounts for the most readily comparable fee items that match the client s existing fee structure. Data Sources The following City-published data sources were used to support the cost of service analysis and fee establishment phases of this Study: The s Adopted Budget for Fiscal Year A complete listing of all City personnel, salary/wage rates, regular hours, paid benefits, and paid leave amounts provided by the Finance Department. Various correspondences with the City staff supporting the adopted budgets and current fees, including budget notes and expenditure detail not shown in the published document. Prevailing fee schedules provided by each involved department. Annual workload data from the prior fiscal year provided by each involved department or program studied.. The City s adopted budget is the most significant source of information affecting cost of service results. NBS did not audit or validate the City s financial management and budget practices, nor was cost information adjusted to reflect different levels of service or any specific, targeted performance benchmarks. This Study has accepted the City s budget as a legislatively adopted directive describing the most appropriate and reasonable level of City spending. Citywide User Fee Study 8 Prepared by NBS 19

20 Consultants accept the City Council s deliberative process and ultimate acceptance of the budget plan and further assert that through that legislative process, the City has yielded a reasonable expenditure plan, valid for use in setting cost-based fees. Original data sets also support the work of this Study: primarily, estimated staff time at various levels of detail. To develop these data sets, consultants prepared questionnaires and conducted interviews with individual departments. In the fee establishment phase of the analysis, departmental staff provided estimates of average time spent providing a service or activity corresponding with an existing or new fee. Consultants and departmental management reviewed and questioned responses to ensure the best possible set of estimates. Citywide User Fee Study 9 Prepared by NBS 20

21 Section 2 Administrative Fees Most activities and services provided by Half Moon Bay s administrative departments are not recoverable via user or regulatory fees. The scope of this analysis focused solely on various administrative processing fees involving the City Manager, City Clerk, and/or Finance departments. Cost of Service Analysis NBS developed a composite fully-burdened hourly rate for the City Manager, City Clerk, and Finance departments, as shown below: Section 1, Cost of Service Analysis, of this report describes the types of expenditures and allocated costs considered in the development of these rates. All subsequent administrative fee calculations will incorporate the fully burdened hourly rates of $221, $175, and $189, depending on which department provides the fee for service. Fee Establishment Expenditure Type City Manager City Clerk Finance Labor $ 396,136 $ 199,134 $ 436,987 Recurring Non-Labor 83,314 60,783 83,841 Citywide Overhead 124,572 62, ,465 Dept. Admin 183, , ,314 Department Total $ 787,733 $ 422,422 $ 1,060,606 Fully Burdened Hourly Rate $ 221 $ 175 $ 189 Reference: Direct Hours Only 3,560 2,411 5,625 The list of fees shown in Appendix A.1 to this report incurred some notable changes, deletions, and/or additions to the City s existing fee schedule. Returned Check fees are regulated (capped) by the State at $25 for the first check, and $35 for each subsequent check. Recommended fee amounts were adjusted accordingly. Several fees pertaining to duplication (copy) requests were recommended for elimination, including copies of Municipal Code, City Budget, CAFR, and subscription services for commission and Council agendas, all of which are available via the City s website. Certification of Documents fee for the City Clerk was eliminated. This service is now consolidated with the County. Staff Research fees were restructured to a blended rate per department or program performing the service. Taxi Cab License fees were deleted, as the City s updated Municipal Code requires operators to have permits from another City in San Mateo County. Citywide User Fee Study 10 Prepared by NBS 21

22 New fees proposed by City staff include Business Improvement District Administration of City Hotels, and cost recovery for Street Closures. Cost Recovery Evaluation Appendix A.1 presents the results of the detailed cost recovery analysis for the City s various administrative fees. The Cost of Service per Activity column establishes the maximum adoptable fee amount for the corresponding service identified in the Fee Description list. The City s general administrative fees currently recover approximately 46% of the cost of providing services. As shown in the following table, the City collects approximately $14,000 per year in revenues at current fee amounts. At full cost recovery, the same demand for these services would generate approximately $31,000. Department / Division Estimated Annual Current Fee Revenue Estimated Annual Full Cost Recovery Fee Revenue Annual Cost Recovery Surplus / (Deficit) Current Cost Recovery % Estimated Annual Recommended Fee Revenue Recommended Cost Recovery % Administrative Departments $ 14,385 $ 30,983 $ (16,598) 46% $ 30, % NBS provided the full cost of service information and the framework for considering fees, while those closest to the fee-paying population, the City departments, considered appropriate cost recovery levels at or below that full cost. The Recommended Fee column in Appendix A.1 displays the City staff s initially recommended fee amounts. These initial recommendations for adjusted fee amounts increase cost recovery for these services by approximately $17,000 Fees would recover approximately 100% of the total costs of providing fee related services. 22 Citywide User Fee Study 11 Prepared by NBS

23 Section 3 Planning Fees The Planning Division performs a variety of functions that are intended to conserve and enhance the City s environmental resources and scenic beauty, to preserve its historic resources and small town heritage, to manage the community s growth rate, and to enforce the policies and regulations related to land use and development. Cost of Service Analysis The following categorizes the Planning Division s costs across both fee related and non-fee related services, as well as the resulting fully-burdened hourly rate applicable toward establishing the full cost of providing fee related services. Expenditure Type GP / LCP Special Projects CIP Support Public Information / General Application / Permitting Services Labor $ 101,849 $ 39,145 $ 5,345 $ 24,635 $ 187,414 $ 358,388 Recurring Non-Labor 117,208 45,048 6,151 28, , ,433 Citywide Overhead 100,312 38,555 5,264 24, , ,980 Dept. Admin 17,375 6, ,203 31,973 61,141 Department Total $ 336,744 $ 129,426 $ 17,671 $ 81,451 $ 619,649 $ 1,184,941 Eligible Cost Recovery from Fees for Service 0% 0% 0% 60% 100% 56% Division Totals: Amount Targeted for Recovery in Billings/Fees $ - $ - $ - $ 48,871 $ 619,649 $ 668,519 Amount Requiring Another Funding Source $ 336,744 $ 129,426 $ 17,671 $ 32,580 $ - $ 516,422 Cost per Direct Hour Recoverable from Fees for Service $ - $ - $ - $ 15 $ 196 $ 211 Reference: Direct 3,169 Hours Total Section 1, Cost of Service Analysis, of this report describes the types of expenditures and allocated costs considered in the development of an hourly rate. All subsequent cost of service calculations at the individual fee level assume a fully burdened hourly rate of $211, with maximum recovery of approximately $669,000 in costs from fees for service. The cost category columns shown in the table above were adapted and summarized from Division staff interviews. To assist the reader in understanding the underlying costs and assumptions used to calculate the fully burdened hourly rate, the following provides summary descriptions of each cost category: GP/LCP Planning staff support the ongoing maintenance and cyclical update of the City s General Plan (GP) and Local Community Plans (LCP). These costs do not apply toward recovery from Planning and Zoning review fees for service. Special Projects Planning staff support the Council and City management s requests for research requests and special project support. These costs do not apply toward recovery from Planning and Zoning review fees for service. CIP Support Planning staff support the review and implementation of various City capital improvement projects. These costs do not apply toward recovery from Planning and Zoning review fees. Public Information Activities associated with responding to phone calls and supporting both active permits and the development review process in general. Typically, some portion of costs for provision of general public Citywide User Fee Study 12 Prepared by NBS 23

24 information and assistance do not apply toward recovery from fees. Planning staff estimated that approximately 60% of these costs support land use application review activities, while the remaining costs should be not be considered in the calculation of fees for services. The remaining 40% of the costs of providing public information services requires funding from sources other than fees. Application and Permitting Services Development review and approval comprises the majority of this Division s work efforts. 100% of these costs apply toward recovery from Planning and Zoning fees for service. Significant analytical and policy decisions revolve around inclusion of categorized activity costs in the fully burdened hourly rate. The decision of whether to apply or exclude certain costs toward recovery in fees for service stems from the basic fee setting parameters offered by the California State Constitution and Statutes, which requires that any new fee levied or existing fee increased should not exceed the estimated amount required to provide the service for which the charge is levied. Fee Establishment Half Moon Bay s Planning Division currently charges for application processing and entitlement review services via a mixture of flat fees and deposit based fees. Flat fees charge one finite amount per project. Deposit based fees require an initial deposit of funds to begin processing of an application, time is tracked and billed to the project by City staff against the deposit amount, and additional funds are either requested from the applicant as needed, or refunds are provided to the at completion of the project. The City revaluated each fee item on the Planning Division s current list of fees as to whether it should be charged as a flat fee or a deposit based fee. The City re-grouped and re-ordered many of the fees for better organization, and deleted several fee items. New fee items added include Pre-Application Review, Minor Amendment, and a new deposit requested from developers for processing of Appeals. While this section of the User Fee Study Report focuses on the Planning Division s costs and fees, the Public Works Engineering Division also participates in the review of Planning s applications. As such, the Engineering Division s analysis establishes additional deposit amounts for their review, when required. Cost Recovery Evaluation Appendix A.2 presents the results of the detailed cost recovery analysis for the Planning Division s fees. The Cost of Service per Activity column establishes the maximum adoptable fee amount for the corresponding service identified in the Fee Description list. The City s Planning and Zoning fees currently recover approximately 32% of the Planning Division s cost of providing services. As shown in the following table, the City collects approximately $100,000 per year in revenues at current fee amounts. At full cost recovery, the same demand for these services would generate approximately $313,000. Department / Division Estimated Annual Current Fee Revenue Estimated Annual Full Cost Recovery Fee Revenue Annual Cost Recovery Surplus / (Deficit) Current Cost Recovery % Estimated Annual Recommended Fee Revenue Recommended Cost Recovery % Planning $ 100,080 $ 313,387 $ (213,307) 32% $ 305,561 98% 24 Citywide User Fee Study 13 Prepared by NBS