Presented by: Greta Davis, Associate Director GET YOUR MASTER FEE SCHEDULE FIT 2015 CMTA ANNUAL CONFERENCE

Transcription

1 Presented by: Greta Davis, Associate Director

2 TODAY S REGIMEN Intro to Master Fee Schedule (MFS) MFS Health Diagnostic Current Fee Setting Environment Nuts and Bolts of a Fee Analysis Know your costs Best Management Practices Effective Cost Recovery Policy Summary of 9 Recommendations 2

3 MASTER FEE SCHEDULE Consolidated, central document of all agency fees and charges Commonly organized by organizational function / department issuing the charge Types of fees and charges typically included: User and Regulatory Fees Business License Tax Fines and Penalties Utility Rates Impact Fees 3

4 MFS HEALTH DIAGNOSTIC Score Yes = 20 points; No = 10 points 1) Does your agency have a Master Fee Schedule (MFS)? 2) Does your agency have a formalized Cost Recovery Policy for User and Regulatory Fees? 3) Has a comprehensive fee analysis been performed in the last 3 years either internally or by an independent consultant? 4) Do fees increase automatically by a percentage based on policy, CPI, or otherwise? 5) Does your agency have a current Cost Allocation Plan? 6) Does your agency recover overhead costs from fees, enterprise funds or special revenue funds? How many received 100 points or 100% (green) How many received 50 points or a failing grade? (red) 4

5 RECOMMENDATIONS 1. Develop a Master Fee Schedule Central go-to document / fee authority Easier to discuss, adopt and update 2. Clarify type of charge due to different adoption procedures, governing codes and limitations: User and Regulatory Fees Business License Tax Schedule Fines and Penalties Utility Rates Impact Fees 5

6 WHAT ARE USER AND REGULATORY FEES? User Fees (non-utility): Charges imposed for a service provided for a particular service, at the request or action of an individual/entity Regulatory Fees: Charges imposed to recover costs associated with the City s power to regulate certain activities Cost recovery opportunities Revenues implemented by Council / Board NOT: Taxes, Fines, Development Impact Fees, Utility Rates, etc. 6

7 TYPES OF FEES General Operating Fees Administrative Development Public Safety Recreation Utility Districts and Departments Annual Storm water Permit fees Review of Tentative Maps and Building construction plans Sewer Main Extension permits Environmental compliance permits / annual facility inspections for local businesses Service turn on / shut off 7

8 CURRENT FEE SETTING ENVIRONMENT 20 th Century: Suburban sprawl - economic focus on housing and jobs Minimum code requirements / codes still evolving Lower public resistance and awareness regarding development, fees and charges Low cost of construction Reliance on new constriction as source of revenue Subsidization of small projects by larger projects Revenue management not calibrated to performance management 8

9 CURRENT FEE SETTING ENVIRONMENT 21 st Century: CA population explosion, CA economic boom (and bust) Real estate viewed increasingly as commodity Accelerated subdivision sprawl Exponential growth in code requirements / constraints CEQA: 1970 Proposition 13: 1978 Proposition 218: 1996 Proposition 26: 2010 Increased construction costs Heightened public awareness regarding fees and charges 9

10 CURRENT FEE SETTING ENVIRONMENT 21 st Century Summary: More constraints More requirements Higher costs Less ability for new construction (build out, local climate) Customer chooses more whether to pull a permit, participate in a local program Service levels are subject to policy and available funding 10

11 Bathtub Economics INPUTS Reducing Revenue, Budget, Staffing, Training, Supplies, Cost Recovery BLDG DEPT Increasing Code, Laws, Ordinances, Customer Service CURRENT STATE SERVICE EXPECTATIONS 11

12 Bathtub Economics INPUTS Quantified Revenue, Budget, Staffing, Training, Supplies, Cost Recovery BLDG DEPT Quantified Code, Laws, Ordinances, Customer Service CORRECTED STATE SERVICE EXPECTATIONS 12

13 RECOMMENDATIONS 3. Recognize fees are part of financial sustainability Attain revenue stability Raise awareness about costs Provide necessary and basic services/ enhance service delivery Build confidence in local government 4. Calibrate fees that generate a sustainable and reasonable balance: Based on local service priorities and cost recovery policy Habitually document demands for service, resource and use allocation, fully burdened cost and cost recovery 13

14 RECOMMENDATIONS 5. Study your fees: Establish the full cost of providing services for the biggest fee chargers Understand the true costs of providing services Update fee schedules accordingly 6. Benefits of realigning fees: Reduce General Fund subsidy Realize revenue for services reduced or eliminated Fund departments efficiently Set realistic expectations for cost recovery 14

15 Data Collection 1. Define Costs 2. Allocate Overhead Costs 3. Calculate the Full Cost 4. Set Fee Structure 5. Establish Policy ROAD MAP OF A FEE STUDY Time Data or Estimates Budgeted Labor Costs Budgeted Non-Labor Costs Direct Costs Indirect Costs Division or Dept-Wide Agency- Wide Total Annual Cost of Service Fully- Loaded Hourly Rates Costs by Function of Service Time Data or Estimates Volume Statistics Fee Structures Existing Recovery Cost Recovery Objectives Targeted Recovery from Fees Cost of Service Analysis Fee Design Key areas of policy input needed from departments and/or City-wide management group 15

16 HOW TO PREPARE FOR A STUDY Understand annual service demands: Tracking and measuring techniques Analyzing and applying data Quantify resource capacity: What are the available staff resources? Where does the time go? What are the fee fundable versus non-fee fundable activities in your department? What is the Department s billable capacity? How much indirect versus direct service time? 16

17 HOW TO PREPARE FOR A STUDY (2) Define program costs: Annual on and off-budget costs Indirect Supporting department costs (CAP next slide) Blended hourly rates versus individual staff rates What is the value of one-billable-hour Quantify and/or track service levels: Establishing Time Budgets for Various Services Estimating vs. Time Tracking Benefits and Challenges of Time Tracking Tracking at the Project vs. General Time Level Reconciling Available Staff Resources 17

18 DEFINING TOTAL COST COST COMPONENT CONTENTS Departmental Budget: Salaries and Benefits, Services and Supplies Departmental, and City-wide Overhead Review by other departments such as Community Development, Public Works & Police, etc. On-going and projected technology costs, General Plan update and maintenance, Imaging costs, etc. 18

19 KNOW YOUR COSTS Indirect Cost Allocation Plan: Defines indirect support services costs Allocates costs fairly and equitably to service providing departments Helps recover costs through: user fees / fully burdened rates general fund support reimbursement from enterprise funds, utility funds, ISFs State and federal grant reimbursements agreements with other agencies 19

20 SUMMARY OF COST RECOVERY BASICS Central cost recovery considerations: Service Levels & Fee = Service Delivery Cost = Time x Rate = Fee Rate = All Direct and Indirect Costs / Available Hours Cost recovery metrics and assumptions: +/- 100% staff utilization = revenue recovery Increasing / decreasing billable hours, time budget per fee/service, total cost of services Controlling Variables: Time, Fees, Total Cost, Quantity, Revenue 20

21 RESULTS OF A FEE STUDY PROCESS Awareness gained: Connection between Staff Utilization and Revenue Recovery Revenue Sources / Mix : residents, businesses, other governmental funding sources Proactive Cost Recovery Policy You are in the driver s seat: Process improvement and efficiency Establishing estimated reasonable effort Understanding / reacting to local service level priorities Negotiating between revenues (fee levels) and competing requirements 21

22 SAMPLE SUMMARY OF STUDY RESULTS Department / Division Estimated Annual Current Fee Revenue Eligible Cost Recovery from User / Regulatory Fee Revenue Annual Cost Recovery Surplus / (Deficit) Current Cost Recovery Percentage Planning $ 251,000 $ 473,000 $ (222,000) 53% Engineering Services 322, ,000 (531,000) 38% Building 1,067,000 1,140,000 (73,000) 94% Police 157, ,000 (378,000) 29% Animal Care Center 177, ,000 (50,000) 78% Fire Prevention 143, ,000 (492,000) 23% Special Events 28,000 66,000 (38,000) 42% Finance Department 109, ,000 (92,000) 54% Total $ 2,254,000 $ 4,130,000 $ (1,876,000) 55% Should fees be adopted at 100% full cost recovery = reduction of subsidy by $1.9 million This could generate additional community service options Study of fees provides information for re-aligning toward cost recovery 22

23 FEE STUDY BEST MANAGEMENT PRACTICES: Comprehensive Fee Study every 3-5 years (typical 5 7) More frequent study during: economic downturn budget and staffing changes process improvements Annual increase mechanism (CPI vs. labor cost index) Combined Master Fee Schedule Established and documented Cost Recovery Policy 23

24 POLICY CONSIDERATIONS Main concerns of: Elected Stakeholders Reasons for 100% cost recovery Fiscal Sustainability Specific Private Benefit Economic Development City Goals / Priorities Behavior Modification Compliance Concerns At-Large Public Benefit 24

25 POLICY CONSIDERATIONS (2) Service level promises and agreements: Fee benchmarking Best management practices and efficient operations Time to market and service delivery Public relations Service level tracking 25

26 COST RECOVERY POLICY AND FEE-SETTING Full Cost of Service ($) Amount of Subsidy from Other Resources (%) Maximum Level of Targeted Cost Recovery (100%) Current Level of Cost Recovery (%) Revenue from Current Fee ($) Minimum Level of Targeted Cost Recovery (0%) 26

27 COST RECOVERY DECISION MATRIX Fees should be assessed according to the individual or private benefit gained: GENERAL BENEFIT PRIVATE BENEFIT POLICE PARK MAINTENANCE RECREATION/ COMMUNITY SERVICES FIRE SUPPRESSION BUILDING PERMITS PLANNING AND ZONING APPROVAL ENGINEERING DEVELOPMENT REVIEW TAX FUNDED FEE FUNDED 27

28 RECOMMENDATIONS 7. Develop a documented cost recovery policy with elected official cooperation and buy-in 8. Develop a cost recovery policy by department 9. Include an annual escalator (CPI or labor cost) 28

29 COST RECOVERY POLICY EXAMPLE (Proposed San Juan Capistrano) Administrative Fees 100% Recovery Planning and Building 100% Recovery (exception water heater) PW, Engineering and Utility 100% Recovery Community Services/Recreation Direct Costs - 93% Recovery 29

30 COST RECOVERY POLICY EXAMPLE (Camarillo) Administrative Fees 100% Recovery Planning and Building 100% Recovery (exception water heater) PW- Engineering 100% Recovery Police - 100% Recovery 30

31 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) Policy for ongoing review of fees and charges: comprehensive study every 5 years, annual update using CPI Key points from San Luis Obispo s Cost Recovery Policy: 31

32 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) Factors considered for SETTING COST RECOVERY LEVELS: 1. Community wide v. special benefit 2. Service recipient v. service driver 3. Effect of pricing on demand for service 4. Feasibility of collection and recovery 32

33 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) Factors FAVORING LOW COST RECOVERY 1. No intended benefit between amount paid and benefit received 2. Collecting fees is not cost effective or impacts efficient service delivery 3. No intent to limit the use of, or entitlement to the service 4. Service is non-recurring 5. Collecting a fee discourages compliance 33

34 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) 1. Service is similar to those provided by the private sector Factors FAVORING HIGH RECOVERY 2. Other private or public service delivery options exist 3. Demand or equity management requires a direct relationship between fee and cost 4. Service is discouraged 5. Service is regulatory in nature where voluntary compliance is not expected 34

35 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) Concepts regarding the USE OF FEE REVENUE 1. Revenues do not exceed the costs of providing services 2. Total cost all direct and indirect costs identifiable 3. Method of collection should be simple 4. Market sensitivity and smaller user groups should be considered 5. Unified approach to establishing fees should be used according to policy 35

36 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) LOW COST RECOVERY SERVICES 1. Public safety and emergency response services: police patrol / fire suppression 2. Maintaining and developing public facilities: streets/parks/general purpose 3. Social service programs 4. Economic development activities 36

37 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) RECREATION COST RECOVERY POLICY 1. Fees for adult programs should be relatively high 2. Youth and senior programs should be relatively low, except where other public or private market options exist 3. Fees should encourage a high level of participation for youth and seniors High-Range Cost Recovery Activities (60% to 100%): Adult athletics, Banner permit applications, Child care services (except Youth STAR), Facility rentals, Triathlon, Golf Mid-Range Cost Recovery Activities (30% to 60%) Classes, Holiday in the Plaza, Major commercial film permit applications Low-Range Cost Recovery Activities (0 to 30%): Aquatics, Batting cages, Community gardens, Junior Ranger camp, Minor commercial film permit applications, Skate park, Special events, Youth sports, teen and senior services 37

38 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) DEVELOPMENT REVIEW COST RECOVERY POLICY % for Planning, building, engineering, fire review 2. Services should be reviewed periodically for efficient service delivery 38

39 COST RECOVERY POLICY EXAMPLE (San Luis Obispo) COMPARABILITY WITH OTHER COMMUNITIES 1. Fee survey should be considered, but not the sole guiding principal for setting a price for any given service 39

40 SUMMARIZED RECOMMENDATIONS: 1. Develop a Master Fee Schedule (MFS) 2. Differentiate between user/regulatory fees and other types of fees, charges, penalties, and taxes in the MFS 3. Recognize fee revenue as part of sustainability planning 4. Calibrate fees to balance available resources with service level expectations 5. Study fees on a recurring basis; know total cost of providing services 6. Reduce subsidy where possible; realize revenue for ongoing or enhanced service delivery 7. Develop a formal, documented cost recovery policy 8. Differentiate cost recovery policies by department / service 9. Include an annual escalator 40

41 QUESTIONS AND COMMENTS Greta Davis Associate Director