City of San Luis Obispo. Citywide User Fee and Rate Study. Final Report. March 30, 2017

Transcription

1 Citywide User and Rate Study Final Report March 30, Temecula Parkway, Suite 100 Temecula, CA Toll free: Fax:

2 TABLE OF CONTENTS Executive Summary... 1 Purpose... 1 Outcomes... 1 Report Format... 2 Section 1 Introduction and Fundamentals... 3 Scope of Study... 3 Methods of Analysis... 4 Service Analysis... 4 Establishment... 6 Cost Recovery Evaluation... 7 Comparative Survey... 8 Data Sources... 8 Section 2 Finance Administrative s Service Analysis Establishment Cost Recovery Evaluation Section 3 Community Development Planning Division s Service Analysis Establishment Cost Recovery Evaluation Section 4 Community Development Engineering Development Review s Service Analysis Establishment Cost Recovery Evaluation Section 5 Public Works s Service Analysis Establishment Cost Recovery Evaluation Section 6 Utilities s Service Analysis Establishment Cost Recovery Evaluation User s and Charges Study Prepared by NBS TOC

3 Section 7 Fire Department Fire Prevention s Service Analysis Establishment Cost Recovery Evaluation Section 8 Police s Service Analysis Establishment Cost Recovery Evaluation Section 9 Parks & Recreation Department Impacts of Proposition 26 on Recreation s Analysis Establishment Section 10 Conclusion Appendices Service Analysis ( Tables) Finance Appendix A.1 Community Development Planning Appendix A.2 Community Development Engineering Appendix A.3 Public Works Appendix A.4 Utilities Appendix A.5 Fire Hazardous Occupancy Permits and Inspections Appendix A.6 Fire Development Review Appendix A.7 Police Appendix A.8 Development Review Comprehensive Cost and Chart Appendix A.9 Comparative Survey Finance Appendix B.1 Development Review Planning Appendix B.2 Development Review Engineering Appendix B.3 Public Works Appendix B.4 Utilities Appendix B.5 Fire Hazardous Occupancy Permits and Inspections Appendix B.6 Fire Development Review Appendix B.7 Police Appendix B.8 User s and Charges Study Prepared by NBS TOC

4 Executive Summary Purpose NBS performed a User s 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 realign fee amounts with the adopted cost recovery policies. Outcomes This Study examined user and regulatory fees managed by the following City departments and programs: Finance, Development Services, Public Works, Utilities, Fire Prevention, and Police. The Study identified approximately $4.3 million currently collected per year from fees for service, versus $5.2 million of eligible costs for recovery from fees for service. The following table provides a summary of results for each service area studied: Department / Division Current Revenue Full Cost Recovery Revenue Current Cost Recovery % Revenue Cost Recovery % Finance $ 442,998 $ 440, % $ 439,240 Development Review (Planning) $ 1,243,660 $ 1,234, % $ 1,170,708 95% Development Review (Engineering) $ 585,979 $ 957,380 61% $ 942,263 98% Public Works $ 747,631 $ 655, % $ 654,365 Utilities $ 316,722 $ 773,277 41% $ 769,215 99% Fire Prevention $ 828,777 $ 971,760 85% $ 861,641 89% Police $ 90,825 $ 135,311 67% $ 110,037 81% Total $ 4,256,592 $ 5,168,397 82% $ 4,947,470 96% As shown, the City is recovering approximately 82% of costs associated with providing user and regulatory fee related services. Should the Council elect to adopt fee levels at of the full cost recovery amounts determined by this Study, an additional $912,000 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 User s and Charges Study 1 Prepared by NBS

5 amount. In addition, the City has an adopted Cost Recovery Policy, which guides decisions about the ultimate fee amounts adopted. As such, City staff provided initial recommended fee amounts for consideration. If Council elects to adopt fee levels at staff s initial recommendations, an additional $691,000 in costs could be recovered, or a 96% cost recovery outcome for services provided. Based on the project s timeline and information available, the NBS analysis for the Parks and Recreation Department established the total annual cost of the Department combined, rather than an analysis at the individual recreational program or fee level. The Department performed their own analysis of costs at the program level and individual fee level, and recently reviewed their recommendations for changes to various fee amounts with the Parks and Recreation Commission. Refer to the Parks and Recreation Agenda Report, February 1, 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 9 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 hourly rate(s), the calculation of the costs of providing service, the cost recovery policies of each fee category, and the recommended fees for providing services. Section 10 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. User s and Charges Study 2 Prepared by NBS

6 Section 1 Introduction and Fundamentals Scope of Study The following is a summarized list of fees for each City department or program studied: General administrative services, including: o Business License processing and renewal o Returned check processing o Special requests for GIS services. Community Development services, including: o Planning & Zoning entitlement and permit approvals, o Engineering plan review and encroachment permit processing o Support to Building plan review Public Works Department services, including o Tree maintenance and removal o Support to Planning entitlement review o Support to Engineering plan review and encroachment permit processing o Transportation Planning and Engineering o Construction field inspection for improvements projects Utilities services, including: o Meter installation and removal, account set up and disconnect o Lateral installation and abandonment o Support to Planning entitlement review o Support to Engineering plan review and construction inspection o Support to Building plan review Fire Prevention services, including: o Hazardous occupancy permits o Nonmandated and required inspections o Certified Unified Participating Agency fees (CUPA) o Multidwelling fire and life safety inspection o Support to Planning entitlement review o Support to Engineering plan review o Support to Building plan review and field inspection o Fire sprinkler and suppression systems Police services, including: o Various administrative processing fees such as vehicle impound and release, alarm permits, taxi permits, etc. User s and Charges Study 3 Prepared by NBS

7 o Support to Planning Entitlement Review Recreational services, classes, programs and permits 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 and the resultant master fee schedule 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.) Methods of Analysis There are three phases of analysis completed for each City department or program studied: 1) service analysis 2) establishment 3) Cost recovery evaluation 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 realtime 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 nonlabor costs where applicable, allocated nonlabor costs, and allocated Citywide 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 nonlabor costs Discrete expenses incurred by the City due to a specific service or activity performed, such as contractor costs, thirdparty 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 nonlabor costs at the activity level.) Allocated indirect nonlabor 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 organizationwide overhead These are expenses, both labor and nonlabor, related to agencywide support services. Support services include general administrative services such User s and Charges Study 4 Prepared by NBS

8 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 the City s Finance Department. All cost components in this Study use annual (or annualized) figures, representing a twelvemonth cycle of expenses incurred by the City in the provision of all services and activities agencywide. 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 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 fulltime 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 feerecoverable and nonfee 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 onestep 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. User s and Charges Study 5 Prepared by NBS

9 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 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. Establishment Because most of the City s fees are flat fees, 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 timetracking 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 restructured 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. User s and Charges Study 6 Prepared by NBS

10 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 means that the fee currently recovers the full cost of service. A rate between 0% and indicates partial recovery of the full cost of service through fees. A rate greater than 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. In most cases, imposing a fee above this threshold could require the consensus of the voters. NBS also assists with modeling the recommended or targeted level of cost recovery for each fee, always established at, or less, than the calculated full cost of service. Targets and recommendations always reflect agencyspecific judgments linked to a variety of factors, such as existing City policies, agencywide 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 publicbenefit 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 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 publicversusprivate 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 noncompliance 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 nonresidents, residential and commercial, nonprofit entities and business entities)? User s and Charges Study 7 Prepared by NBS

11 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 feepaying population the City departments and programs have considered appropriate cost recovery levels at or below that full cost for the Council s review. Comparative 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 Survey for the. NBS worked with the City to choose five comparative agencies: Cities of Davis, Santa Barbara, Santa Maria, Paso Robles, and the County of San Luis Obispo. 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 nonconclusive 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 fee categories and amounts for the most readily comparable fee items that match the client s existing fee structure. Data Sources The following Citypublished 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. User s and Charges Study 8 Prepared by NBS

12 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. workload data from the prior fiscal year provided by each involved department. 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. 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 costbased 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. User s and Charges Study 9 Prepared by NBS

13 Section 2 Finance Administrative s The Finance Department processes City Business Licenses. The City may charge a fee to recover for the cost of issuing a license as well as renewing that license on an annual basis. Service Analysis At the time of Study, the Finance Department included both general finance and accounting duties, as well as the City s internal information technology support staff. As such, NBS developed one composite fullyburdened blended hourly rate for Finance Services, and one for IT services. The details of this rate calculation are presented below: Cost Element Finance Services IT Services Labor $ 1,132,178 $ 1,055,849 Recurring NonLabor 451, ,300 Citywide Overhead 251,607 Division Administration 740, ,743 Department Total $ 2,575,691 $ 1,686,893 Fully Burdened Hourly Rate $ 131 $ 106 Reference: Direct Hours Only 19,726 15,987 *Citywide Overhead for IT services is included in the Division Administration line Section 1, Service Analysis, of this report describes the types of expenditures and allocated costs considered in the development of these rates. All subsequent fee calculations will incorporate the fully burdened hourly rate of $131 for Finance Services and $106 for IT Services. Establishment The list fees shown in Appendix A.1 to this report did not incur many significant changes, deletions, or additions from the City s prior fee schedule. Processing fees for Business License activities are inclusive of support from the Planning and Building departments, and Returned Check fees are regulated (capped) by the State at $25 for the first check, and $35 for each subsequent check. Cost Recovery Evaluation Appendix A.1 presents the results of the detailed cost recovery analysis for the City s general administrative fees. The Service per column establishes the maximum adoptable fee amount for the corresponding service identified in the Description list. User s and Charges Study 10 Prepared by NBS

14 The City s general administrative fees currently recover approximately 101% of the cost of providing services. As shown in the following table, the City collects approximately $443,000 per year in revenues at current fee amounts. At full cost recovery, the same demand for these services would generate approximately $440,000. Department / Division Current Revenue Full Cost Recovery Revenue Current Cost Recovery % Revenue Cost Recovery % Finance $ 442,998 $ 440, % $ 439,240 NBS provided the full cost of service information and the framework for considering fees, while those closest to the feepaying population, the City departments, considered appropriate cost recovery levels at or below that full cost. The column in Appendix A.1 displays the City staff s initially recommended fee amounts. These recommended fee amounts adjust several fees downward from current fee amounts to equal the calculated full cost of service, while two fees for business license processing activities propose to increase. Returned Check fees, which are regulated (capped) by the State, recommend no change because existing fees are already at the State s maximum allowed amount. These initial recommendations for adjusted fee amounts decrease revenue by approximately $3,700. s would continue to recover approximately of the total costs of providing fee related services. User s and Charges Study 11 Prepared by NBS

15 Section 3 Community Development Planning Division s The City has adopted laws that regulate the use of land and the design of most commercial and housing projects. The purpose of these laws is to protect the health, safety and welfare of community residents and visitors. Laws, such as the Zoning Regulations, architectural review requirements, and Subdivision Regulations, require that people submit applications for project approval to the Community Development Department. The Development Review Division evaluates development proposals for consistency with the City's General Plan and all other applicable plans and regulations. Staff from this Division also prepare and oversee reports that study the environmental effects of development projects and identify ways of avoiding environmental damage. This work is required by the California Environmental Quality Act (CEQA). Planning actions are those taken by the City Council, Planning Commission, Architectural Review Commission, or the Administrative Hearing Officer. Actions cover a wide range of activities from the City Council's approval of a housing subdivision to the Hearing Officer's approval of a permit for a sixfoot fence in the front yard of a house. The Development Review Division serves the residents, property owners, and businesses of the by administering a variety of City regulations relating to physical development of the community. Additionally, the department manages the development of Citywide and neighborhood plans and programs including adoption and maintenance of the General Plan. Service Analysis The following categorizes the Planning Division s costs across both fee related and nonfee related services, as well as the resulting fullyburdened hourly rate applicable toward establishing the full cost of providing fee related services. Cost Element Public Information CIP Review and Support Direct ( Related) Services Total Labor $ 164,057 $ 1,965 $ 494,799 $ 660,822 Recurring NonLabor Citywide Overhead 141,154 1, , ,567 Allocated Common Activities 142,667 1, , ,662 Department Total $ 447,879 $ 5,365 $ 1,350,808 $ 1,804,051 Cost Recovery Targeted from s 60% 0% 90% Amount Targeted for Consideration in Billings/s 268,727 1,350,808 1,619,535 Amount Requiring Another Funding Source 179,151 5, ,516 Fully Burdened Hourly Rate $ 32 $ $ 159 $ 191 Reference: Direct Hours Only 8,494 All subsequent cost of service calculations at the individual fee level assume a fully burdened hourly rate of $191, with approximate recovery of $1.6 million 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: User s and Charges Study 12 Prepared by NBS

16 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 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. CIP Review and Support Development Review Division 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. Direct (Related) Services Development review and approval comprises the majority of this Division s work efforts. 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. Establishment This Study addressed several key feesetting issues for the Development Services Division. First, the Division wanted to change the method of cost recovery for complex application review services from flat fees to a deposit based system. NBS worked with the Division s manager to identify the fee categories that best suited for a deposit based fee structure. Selected fee categories include Planned Development, Rezoning, Appeals, General Plan Amendments, Specific Plan Amendments, Annexation, Development Agreement Application, and Reimbursement Agreement. Second, the City wanted to update its Development Review Surcharge, and evaluate whether there was a better way of accomplishing the surcharge s objective. The City s policy for recovery of development review costs is. To achieve this objective, the City implemented a policy and collection procedure of recovering 45% of selected planning and zoning development application fees at the time of submittal to the Planning Division, with the remaining 55% of the fee collected through a 44% general surcharge established on all building permits. After much review and discussion about the strengths and opportunities for improvement regarding this method of collection, NBS recommended that the City proceed with a project specific collection method; meaning, any particular fee selected for phased collection between the planning and building phases of a project be charged specific to that project. The City has made significant technological advancements since the initial surcharge was implemented, and is now able to track and charge on a projectbyproject basis. The City also wanted to quantify the total estimated costs of development review incurred not only by the Planning Division, but also by departments outside of the Division. Engineering, Public Works, Building, Fire, Police, and Utilities may all receive routed copies of planning applications for review and comment. As such, NBS structured the City s fee model to quantify support costs for each of these departments, where applicable. User s and Charges Study 13 Prepared by NBS

17 Finally, the City wanted to quantify the total estimated costs of support provided by the Planning Division to Engineering project review and Building plan check. NBS structured the City s fee model to quantify these support costs for Engineering, and also recommended separate fee categories for Building Plan Review Support based on the type of project. Cost Recovery Evaluation Appendix A.2 presents the results of the detailed cost recovery analysis for the City s Planning and Zoning fees. The Service per column establishes the maximum adoptable fee amount for the corresponding service identified in the Description list. The City s Planning and Zoning fees currently recover approximately 94% of the Planning Division s cost of providing services. As shown in the following table, the City collects approximately $1.2 million per year in revenues at current fee amounts. At full cost recovery, the same demand for these services would also generate approximately $1.2 million. Department / Division Current Revenue Full Cost Recovery Revenue Current Cost Recovery % Revenue Cost Recovery % Development Review (Planning) $ 1,243,660 $ 1,234, % $ 1,170,708 95% NBS provided the full cost of service information and the framework for considering fees, while those closest to the feepaying population, the City departments, considered appropriate cost recovery levels at or below that full cost. The column in Appendix A.2 displays the City staff s initially recommended fee amounts. These initial recommendations for adjusted fee amounts would decrease the Planning Division s revenues by approximately $73,000. fees are projected to recover approximately 95% of the total costs of providing fee related services. The cost recovery evaluation described above evaluates only the costs of the Development Review Division s services as compared to the City s current fees for Planning and Zoning review. For many fees in the table, the amounts shown in the Current / column of the Appendix reflect approximately 45% of the full fee amount actually charged by the City. The additional Development Review Surcharge currently attempts to recover the remaining 55% of the City s full cost recovery fee amount on top of building permits. The estimated annual surcharge revenue amount displays in the Appendix under the Current column (see Development Review Surcharge category near the bottom of the table). However, it was not possible to translate this lump sum revenue reasonably to the individual fee categories in order to provide a better sense of the Existing Cost Recovery percentage for each fee item. Also, a comparison of the City s existing fee amount to the total cost of providing services, inclusive of supporting departments such as Engineering, Public Works, Fire, etc. is available as Appendix A.9. User s and Charges Study 14 Prepared by NBS

18 Section 4 Community Development Engineering Development Review s The Engineering Development Review Division provides reviews for planning entitlements and building permit plans for grading, drainage, floodplain management, Stormwater regulations, compliance with City Engineering Standards, and the Parking and Driveway Standards. The Division is the lead for processing parcel and final maps to recordation along with the approval of any requisite subdivision improvement plans. The Division issues encroachment and transportation permits. Service Analysis The following table categorizes the Engineering Development Review Division s costs across both fee related and nonfee related services, as well as the resulting fullyburdened hourly rate applicable toward establishing the full cost of providing fee related services. Cost Element Public Information Floodplain Management Engineering Inspection Support (CIP) Stormwater Management Direct Services Total Labor $ 19,818 $ 6,864 $ 13,729 $ 13,729 $ 487,368 $ 541,508 Recurring NonLabor ,849 8,721 Citywide & Department Overhead 11,776 4,079 8,158 8, , ,776 Allocated Common Activities 8,707 3,016 6,032 6, , ,904 Department Total $ 40,621 $ 14,070 $ 28,139 $ 28,139 $ 998,940 $ 1,109,909 Cost Recovery Targeted from s 60% 0% 0% 0% 92% Amount Targeted for Consideration in Billings/s 24, ,940 1,023,313 Amount Requiring Another Funding Source 16,248 14,070 28,139 28,139 86,596 Fully Burdened Hourly Rate $ 3 $ $ $ $ 133 $ 136 Reference: Direct Hours Only 7,510 All subsequent cost of service calculations at the individual fee level assume a fully burdened hourly rate of $136, with approximate recovery of $1 million 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: 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 information and assistance do not apply toward recovery from fees. Engineering staff estimated that approximately 60% of these costs support permits and plan submittal 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. Floodplain Management, Engineering Inspection Support (CIP), and Stormwater Management Staff from the Engineering Department participate in other City projects and programs that are not part of development review approval and regulation. None of these apply toward recovery in fee related services. Direct Services Development review and approval comprises the majority of this Division s work efforts. of these costs apply toward recovery from Engineering development review fees for service. User s and Charges Study 15 Prepared by NBS

19 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. Establishment This Study addressed several key feesetting issues for the Engineering Development Review Division. NBS recommended restructuring of the City s fees for Improvement Plan check to include additional tiers for various project sizes, and a method of scaling the fee amount in between tiers. The City s current fee structure includes a base fee amount plus a flat 1.8% applied to the construction value of the project. Migrating to tiered fee structure reflects a better economy of scale in the effort (and therefore cost or fee amount) for smaller versus larger projects. The City also wanted to quantify the total estimated costs of providing services to engineering development review fees by departments outside of the Division. Planning, Building, Fire, Utilities, and Public Works may all receive routed copies of improvement plans and final map submittals for review and comment. In addition, the Public Works Department participates in issuance and inspection of various encroachment permits. As such, NBS structured the City s fee model to quantify support costs for each of these departments, where applicable. Finally, the City wanted to quantify the total estimated costs of support provided by the Engineering Development Review Division to Planning project review. NBS structured the City s fee model to quantify these support costs. NBS also recommended changing the method of cost recovery for this Division s support to the Building plan review process. Currently the City charges a 15% surcharge on building plans to recover for the costs of Engineering review. The Division created an itemized fee schedule in response to NBS recommendation, and will have the ability to charge fees based on the type and size of the project reviewed, as well as for consideration of the scope of review involved. Cost Recovery Evaluation Appendix A.3 presents the results of the detailed cost recovery analysis for the City s Engineering Development Review fees. The Service per column establishes the maximum adoptable fee amount for the corresponding service identified in the Description list. The City s Engineering fees currently recover approximately 61% of the Division s cost of providing services. As shown in the following table, the City collects approximately $586,000 per year in revenues at current fee amounts. At full cost recovery, the same demand for these services would generate approximately $957,000. User s and Charges Study 16 Prepared by NBS

20 Department / Division Current Revenue Full Cost Recovery Revenue Current Cost Recovery % Revenue Cost Recovery % Development Review (Engineering) $ 585,979 $ 957,380 61% $ 942,263 98% NBS provided the full cost of service information and the framework for considering fees, while those closest to the feepaying population, the City departments, considered appropriate cost recovery levels at or below that full cost. The column in Appendix A.3 displays the City staff s initially recommended fee amounts. These initial recommendations for adjusted fee amounts recover an additional $356,000 of the Engineering Development Review Division s costs annually. s at recommended amounts would recover approximately 98% of the total costs of providing fee related services. The cost recovery evaluation described above evaluates only the costs of the Engineering Development Review Division s services. A comparison of the City s existing fee amount to the total cost of providing services, inclusive of supporting departments such as Planning, Public Works, Fire, etc. is available as Appendix A.9. User s and Charges Study 17 Prepared by NBS

21 Section 5 Public Works s The Public Works Department performs a wide variety of tasks from planting and trimming City trees, inspecting development, maintaining City parks, designing our utilities infrastructure, repairing sidewalks and streets, building bike trails, improving traffic safety, maintaining bridges, swimming pools and stadiums, managing downtown and neighborhood parking, and providing transit service, to repairing City vehicles and maintaining City buildings. Service Analysis The Public Works Department s divisions of Capital Improvement / Development inspection, Transportation, and Tree Maintenance, either charge fees for their disciplinespecific services, or support the review and implementation of fee for service activities in the City s Community Development department. As such, NBS calculated one composite fully burdened blended hourly rate for each division. Public Works Capital Improvement / Development Inspection Cost Element Development Review / Permitting CIP / Other Duties Total Labor $ 280,770 $ 1,285,624 $ 1,566,394 Recurring NonLabor 13,791 63,146 $ 76,937 Department and Citywide Overhead 128, ,850 $ 715,013 Allocated Common Activities 114, ,362 $ 636,442 Department Total $ 536,803 $ 2,457,982 $ 2,994,785 Fully Burdened Hourly Rate $ 135 n/a n/a Reference: Direct Hours Only 3,979 n/a n/a Public Works Transportation Engineering Cost Element Development Review / Permitting CIP / Other Duties Total Labor $ 68,991 $ 564,200 $ 633,190 Recurring NonLabor 4,384 35,852 $ 40,236 Department and Citywide Overhead 9,657 78,971 $ 88,627 Allocated Common Activities 19, ,420 $ 174,425 Department Total $ 102,036 $ 834,442 $ 936,478 Fully Burdened Hourly Rate $ 111 n/a n/a Reference: Direct Hours Only 917 n/a n/a User s and Charges Study 18 Prepared by NBS

22 Public Works Tree Maintenance Cost Element Development Review / Permitting Other Programs and Activities Total Labor $ 29,455 $ 353,076 $ 382,531 Recurring NonLabor (5,638) 16,321 $ 10,682 Department and Citywide Overhead 11, ,644 $ 155,627 Allocated Common Activities 4,240 60,757 $ 64,996 Department Total $ 40,039 $ 573,798 $ 613,836 Fully Burdened Hourly Rate $ 95 n/a n/a Reference: Direct Hours Only 423 n/a n/a Section 1, Service Analysis, of this report describes the types of expenditures and allocated costs considered in the development of these rates. The total estimated cost of Public Works fee related activities (Development Review and Permitting), is approximately $679,000 annually. All subsequent fee calculations will incorporate the fully burdened hourly rate of $135 for Construction Inspection services, $111 for Transportation and $95 for Tree Maintenance. Establishment Public Works has a few Tree maintenance fees charged for Tree/Shrub Abatement, Commemorative Tree Planting, and Tree Removal permits. NBS assisted the Department with clarifying the purpose and structure of these fees. The bulk of fees charged by this department are for inspection of improvement projects and encroachment permits, which initiate in the Engineering Development Review Division. In addition, NBS quantified the costs of the Public Works Department s support to Planning application review. NBS also recommended restructuring of the City s fees for Construction Inspection to include additional tiers for various project sizes, and a method of scaling the fee amount in between tiers. The City s current fee structure includes a base fee amount plus a flat 12.9% applied to the construction value of the project. Migrating to tiered fee structure reflects a better economy of scale in the effort (and therefore cost or fee amount) for smaller versus larger projects. Cost Recovery Evaluation Appendix A.4 presents the results of the detailed cost recovery analysis for the City s Public Works fees. The Total Service per column establishes the maximum adoptable fee amount for the corresponding service identified in the Description list. The City s Public Works fees currently recover approximately 114% of the Department s cost of providing services. As shown in the following table, the City collects approximately $748,000 per year in revenues at current fee amounts. At full cost recovery, the same demand for these services would generate approximately $656,000. User s and Charges Study 19 Prepared by NBS