AGENDA ITEM
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: CARLO TOMAINO
CITY MANAGER
SUBJECT:
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PUBLIC HEARING - A RESOLUTION AMENDING RESOLUTION NO. 2024-02-6781, AMENDING THE UNIFORM SCHEDULE OF SERVICE FEES AND CHARGES
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Summary:
Earlier this year, the City entered into a contract with Clearsource Consulting to prepare a comprehensive User and Regulatory Fee Study. The process included a complete analysis of all current fees and feedback from every City Department. This item summarizes the findings from the study and recommends an updated Fee Schedule proposed for City Council adoption that would be effective July 1, 2024. Prior to adopting new or increased fees, the City Council is required to conduct a public hearing. At the conclusion of the public hearing, the City Council shall determine whether to adopt the updated Fee Schedule. Staff published the legal notice for this public hearing in the Signal Tribune newspaper per Government Code Section 65091(a)(4). The legal notice appeared in the newspaper on April 12 and April 19, 2024. Staff also posted the notice in accordance with Signal Hill Municipal Code Section 1.08.010 on April 5, 2024.
Strategic Plan Goal(s):
Goal No. 1 Financial Stability: Ensure the City’s long-term financial stability and resilience.
Goal No. 3 Economic & Downtown Development: Improve the local economy, support local businesses, and create a vibrant downtown core.
Goal No. 4 Infrastructure: Maintain and improve the City’s physical infrastructure, water system, and recreational spaces.
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Recommendations:
1. Staff recommends the City Council open a public hearing, consider public testimony, approve the proposed service fees and charges.
2. Adopt the resolution, entitled:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA, AMENDING RESOLUTION NO. 2024-02-6781, AMENDING THE UNIFORM SCHEDULE OF SERVICE FEES AND CHARGES
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Fiscal Impact:
The anticipated fiscal impact of the proposed fee changes for Fiscal Year 2024-2025 is approximately $87,000.
Background:
Throughout its history, the City has applied a fiscally conservative approach to its budget and operations. Over the years, this fiscal philosophy has greatly aided the City through economic cycles and preserved its ability to deliver high-quality public services. Recovering the costs of providing fee-related services directly influences the City’s fiscal health and increases its ability to meet the service level expectations of fee payers. Therefore, one of the ways in which the City continues to preserve its financial ability to deliver public services to residents and businesses is to conduct studies to ensure fees remain consistent with the cost of delivering services.
The services for which the City applies a user or regulatory fee typically derive from an individual person or entity’s action, request, or behavior. Therefore, except in cases where there is an overwhelming public benefit generated by the City’s involvement in the individual action, a fee for service ensures the individual user bears the cost incurred by the City to provide that service. When a fee targets full cost recovery, the individual bears the entirety of the cost. Conversely, when a fee targets a less than full cost recovery, another City revenue source, typically the General Fund, subsidizes the individualized activity.
As provided for under State law, cities have the authority to levy user fees to recover costs associated with providing a specific discretionary service. State law, including Propositions 26 and 218, sets parameters under which user fees may be established and administered by public agencies. The user fees may not exceed the estimated reasonable cost of providing the service for which the fee is charged. As such, fees are set based upon an analysis of the cost of providing specific discretionary services, including direct support costs. Pursuant to Government Code Section 660016, et seq., the specific fees to be charged for services must be adopted by the City Council by resolution, and upon approval would need to be incorporated into the Schedule of Fees and Charges (Attachment A and B).
Analysis:
The User and Regulatory Fee Study is a comprehensive effort to evaluate the entire City Fee Schedule and propose adjustments based on the actual cost of providing services. The Fee Study includes technical appendices and a detailed list of recommended changes. For the City Council’s reference, staff has attached the User and Regulatory Fee Study, which includes a Cost-of-Service Analysis, and the Illustration of Existing and Proposed Fees (Attachments C and D). For ease of reference, staff has summarized the following findings statements by broad fee category that may interest the City Council, residents, and the business community.
• Administrative Fees
o Administrative Fees are proposed to remain relatively unchanged.
o Fees for Administrative Services are limited by the State of California.
o The Fee Schedule has been refined to reflect services currently provided.
o An updated fee is proposed to recover vendor processing costs associated with credit card transactions. This fee is intended to function as the equivalent of a pass-through of amounts charged by the City’s credit card processing vendor.
• Building Fees
o Building plan review, permit processing, and field inspection fees have been restructured to enhance the correlation between services provided and fees collected. The proposed fee methodology scales to allow for lower fees for less complex projects and higher fees for more complex projects.
o The City’s Building Permit Fees are substantially lower than those of other cities within the region. The proposed fee adjustments would bring the City’s Building Fees in line with the region without increasing cost substantially.
o Establish fixed, consolidated fees for the City’s most common minor permits; this proposed update would allow applicants to easily estimate permit fees and allow staff to efficiently administer the fee calculation and collection process.
o Current cost recovery from fees is approximately 77%; ultimately, full cost recovery is targeted from proposed fees. However, staff proposes fee adjustments be phased-in over a 3-year period, generally as follows:
§ Year 1 (FY 24/25): 90% cost recovery
§ Year 2 (FY 25/26): 95% cost recovery
§ Year 3 (FY 26/27): 100% cost recovery (full cost recovery)
• Planning Fees
o Due to the nature of development within California, many projects take a significant amount of resources over a multi-month and potentially multi-year timeframe, depending on project complexity and magnitude.
o The current cost recovery varies depending on the fee service examined. Generally, current fees recover approximately 61% of the City’s cost of service. Staff proposes fee adjustments to be phased-in over a 3-year period, generally as follows.
§ Year 1 (FY 24/25): 74% cost recovery
§ Year 2 (FY 25/26): 87% cost recovery
§ Year 3 (FY 26/27): 100% cost recovery (full cost recovery)
• Engineering and Encroachment Permit Fees
o The department uses a combination of outside service providers and internal staff to perform certain plan review and inspection activities.
o The proposed fee structure encourages recovery of City costs in addition to contract service provider costs, while developing fixed fees intended to scale to reflect project complexity.
o The proposed fees are calculated based on the type of project reviewed and inspected. Full cost recovery is targeted from proposed fees.
• Police Fees
o Police Fees were recalibrated to reflect current costs of service and State limits for certain fee-related services.
• Parks, Recreation, and Library Fees
o Parks and Recreation Departments throughout the State are facing significant challenges related to increases in labor, benefits, utility costs, services and supplies, and insurance-related costs. Parks and Recreation Departments have been acutely affected by a 25% increase in minimum wage rates since 2019. At the same time, providing access to community facilities and programs that are educational, safe, and meeting our community standards is an important priority for the City.
o Staff proposes to adjust fees by approximately 15%; amounts are rounded for administrative efficiency. The proposed adjustments are intended to reflect the impact of recent changes in labor and regional cost inflation but also recognize the need to ensure City recreation programs remain affordable to residents.
Conclusion:
As noted throughout the Fee Study, there are instances where the City’s fee schedule falls below the cost of providing services as well as the regional market. The goal of the Fee Study is to understand the City’s relative position to its fees and ensure the proposed fees are reasonable. The overall fiscal impact to the City is nominal, representing a fee adjustment that recaptures some costs while providing for an environment that continues to be affordable to residents and businesses. Any additional revenue expected from the Proposed Master Fee Schedule would offset the cost of providing existing services associated with those fee-related regulatory functions and other programs. Additional fee revenue would not fund new services.
Fairly allocating costs to the services provided and recovering some or all of these costs from service recipients creates value and predictability for City customers and reimburses the City for services provided to a single party, compared to the public at large. The collection of fees for services accomplishes the following:
• Increases the availability of General Fund revenues to be used for services and activities available to all residents and businesses, including public safety and public works services.
• Facilitates the fulfillment of fee-payer service level expectations by collecting fees to fund the existing level of services provided.
Next Steps:
Staff recommends the City Council adopt the proposed Resolution establishing and updating user and regulatory fees for Fiscal Year 2024-2025. The proposed Resolution would clarify the intended multi-year phase-in pattern for various fees and authorize annual inflationary adjustments to fees in between comprehensive studies. The proposed adjustments balance the need to periodically adjust fees based on escalating costs with staff’s desire to deliver high quality services to our residents and the business community.
Reviewed for Fiscal Impact:
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Sharon del Rosario
Attachments:
A: Resolution
B: Exhibit A- Schedule of Fees and Charges
C: Fee Study Report
D: Comparative Analysis of Current and Proposed Fees