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HomeMy WebLinkAboutItem 09a - Adjusting Various City FeesDATE: May 17, 2022 TO: Honorable Mayor and City Council FROM: Hue Quach, Administrative Services Director By: Henry Chen, Financial Services Manager/Treasurer SUBJECT: RESOLUTION NO. 7427 ESTABLISHING AND/OR ADJUSTING VARIOUS FEES FOR CITY SERVICES; AND FINDING THAT THIS RESOLUTION IS EXEMPT FROM THE REQUIREMENTS OF THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (“CEQA”) Recommendation: Adopt SUMMARY On July 21, 2020, the City Council approved a User Fee Cost Recovery Level Policy (User Fee Policy), which provides recommended guidance on cost recovery levels and update frequency. The policy states that the User Fee Schedule will be adjusted annually by either by general increases to total labor costs or the Consumer Price Index for the Los Angeles Urban Wage Earners and Clerical Workers (“CPI-W”), whichever is higher in order to ensure that fee rates and cost recovery levels are maintained over time. Staff performed the calculation based on the CPI-W index for March and reviewed the new fees with each department. Some adjustments were made by the department to reflect their discretion, market conditions, and other factors to the calculated the new fees. The proposed resolution would increase 468 fees, reduce 8 fees, and leave 265 fees unchanged. Upon implementation, the fees would increase revenues citywide by approximately $265,300 annually. Therefore, it is recommended that the City Council conduct a public hearing and adopt Resolution No. 7427 adjusting user fees for the City of Arcadia. BACKGROUND On the final report from the City’s Citizens Financial Advisory Committee (“CFAC”), they recommended for the City to retain consultant services to assist in preparing a detailed cost analysis of the City’s productive hourly rates and user fees, and to adopt a User Fee Policy to provide guidance on the appropriate levels of cost recovery for fee-based activities. The objective was to ensure that the City is fully accounting for the costs and recovering adequate fees for providing those services. The City hired Willdan Financial Resolution No. 7427 Adjusting Various City Fees May 17, 2022 Page 2 of 5 Services (“Willdan”) to prepare an updated user fee schedule. Their focus was to ensure that the City is utilizing comprehensive overhead rates and accurately accounting for the true cost of providing various programs and services within City operations. Their report identified the recommended charges for City services and the recommended level of cost recovery as determined through discussion with City staff and the City’s User Fee Policy, adopted on July 21, 2020. The User Fee Policy provides guidance on the appropriate levels of cost recovery for fee- based activities. This policy served as a general framework for developing specific user fee recommendations. The philosophy behind the policy and recommended cost recovery level policies is provided below: 1. Communitywide vs. Private Benefit: The use of taxpayer dollars is appropriate for services that benefit the community as a whole such as Police Patrol services. When the service or program provides a benefit to specific individuals or groups such as the issuance of building permits, it is common for the individual(s) receiving that benefit to pay for the full cost of that service. 2. Service Recipient vs. Service Driver: The concept of the service recipient vs. service driver is particularly important for regulated activities such as development review and public issued permits. Although the community primarily benefits, 100% cost recovery from the “driver” of the need for service is appropriate such as a building permit or Fire Code occupancy permit. 3. Consistency with City Goals and Policies: City policies and Council goals related to the community’s quality of life may also be factors in setting cost recovery levels. For example, fee levels can be set to promote healthy habits, facilitate environmental stewardship (e.g., encouraging solar panel installations), or discourage certain actions (e.g., false alarms). 4. Elasticity of Demand for Services: The level of cost recovery can affect the demand for services. A higher level of cost recovery could ensure the City is providing services such as recreational classes or summer camps for children and youth without over-stimulating the market with artificially low prices. Such low prices, which reflects a high General Fund subsidy, may attract participants from other cities or crowd out private options for the same service. However, high-cost recovery levels could negatively impact the demand for such services to low- income individuals, children, or seniors. 5. Availability of Services from the Private Sector: High-cost recovery levels are generally sought in situations where the service is available from other sources in order to preserve taxpayer funds for core City services. Conversely, services that are not available from other sources and are typically unavoidable and primary governmental services typically have low or zero cost recovery levels. Resolution No. 7427 Adjusting Various City Fees May 17, 2022 Page 3 of 5 The table below overlays certain cost recovery levels grouped in high (70.1% to 100%), medium (30.1% to 70%), and low (0% to 30%) cost recovery percentage ranges. It is important to note that these groupings provide policy guidance and are not absolute. Overall, the proposed fees in this study generally follow these patterns. COST RECOVERY LEVELS COST RECOVERY PERCENTAGE RANGE POLICY CONSIDERATIONS FEE EXAMPLES HIGH 70.1% - 100% • Individual users or participants receive most or all of the benefit of the service • Other private or public sector alternatives provide the service • The use of the service is specifically discouraged • The service is regulatory in nature Business Licenses & Permits Building & Planning Fees Attorney Fees Fire Code Fees Street Fees MEDIUM 30.1% - 70% • Services having factors associated with the Low and High-cost recovery levels Parking Fees Paramedic Membership Weed Abatement LOW 0% - 30% • No intended relationship between the amount paid and the benefit received • Fee collection would not be cost effective and/or would discourage compliance with regulatory requirements • No intent to limit the use of the service • Public at large benefits even if they are not the direct users of the service • Affordability of service to low- income residents/seniors Recreation Fees (Classes) Library Fees (Programs) Facility Rentals DISCUSSION For Fiscal Year 2022-23, staff has taken the fees from the prior fiscal year and, per the User Fee Policy, adjusted them based on the CPI-W index for March. The Bureau of Labor Statistic calculated the annual inflation factor for March to be 8.5%. The calculated Resolution No. 7427 Adjusting Various City Fees May 17, 2022 Page 4 of 5 fees were then provided to each department for their review. Based on each individual department’s analysis, some fees were further adjusted to reflect market conditions or other policy considerations. The City’s fees will continue to be updated on an annual basis. In the prior year’s staff report, it was recommended that the March CPI figure should be used for consideration of an annual inflationary fee adjustment. However, to be an effective and integral part of the annual budget process, staff will need to know the rates much earlier and would recommend that future inflationary rate adjustments use the month January so that fee calculations will be integrated into the budget preparation process. The proposed resolution would increase 468 fees, reduce 8 fees, and leave 265 fees unchanged. Upon implementation, the increased fees are projected to increase revenues by approximately $265,300 annually. It is recommended that the City Council conduct a public hearing and adopt Resolution No. 7427 adjusting various fees for the City of Arcadia. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. PUBLIC COMMENTS/NOTICE Consideration of Resolution No. 7427 requires a public hearing, which was noticed to the public in the Arcadia Weekly newspaper on May 5 and May 9, 2022. As of the time this report was written, no comments had been received. FISCAL IMPACT Projecting the fiscal impact of new fees is highly difficult due to the demand-based nature of fees, which fluctuates widely. Nonetheless, a calculation has been created based on percentage increases/decreases proposed in key fee categories. The fiscal impact from the fee adjustments is estimated to generate an additional $265,300 of revenues annually. Although it should be noted that this estimate is dependent on the level of participation by the users of the services after they become effective on July 1, 2022. The new fees are reflected in the proposed Fiscal Year 2022-23 budget. RECOMMENDATION It is recommended that the City Council find this Resolution is exempt from the requirements of the California Environmental Quality Act (“CEQA”); and adopt Resolution No. 7427 establishing and/or adjusting various fees for City services. Resolution No. 7427 Adjusting Various City Fees May 17, 2022 Page 5 of 5 Attachment “A” - Resolution 7427 (includes updated User Fee Schedule as Attachment “A” to the Resolution) Attachment "A"