City of Culver City, California
Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council approve a professional services agreement with
NBS Government Finance Group, dba NBS to prepare a user fee study and cost
allocation plan for an amount not-to-exceed $53,675 and an annual update to the
cost allocation plan for an amount not-to-exceed $10,255 per year for up to four (4)
additional years.
BACKGROUND:
The City assesses user fees for certain services including, but not limited to, special
permits, plan check and inspection fees for new construction projects, registration
fees for swim lessons and recreation classes, pet licensing fees, room rental fees,
etc. In general, when an individual pays a user fee, they receive a direct service or
derive some other special benefit/entitlement. In contrast, taxes are not required to
offset the cost to the City of a specific service or facility that a member of the public
actually uses or from which they derive a benefit; however taxes are subject to voter
approval. The purpose of charging user fees is to recover part, or all, of the cost of
providing the service (i.e. processing applications, implementation, enforcement). In
cases where costs are not fully recovered, the activity is being ‘subsidized’ by
general tax revenues. Legislative bodies have the authority to decide whether to
subsidize certain fees when they decide it is in the public’s best interest.
Meeting Date: 09/09/2013 Item Number: C-2
CITY COUNCIL AGENDA ITEM: Approval of a Professional Services Agreement
with NBS Government Finance Group, dba NBS to Prepare a User Fee Study and
Cost Allocation Plan Update in an Amount Not-to-Exceed $53,675.00 Plus $10,255
for Each of the Subsequent Four Years for Updates to the Plan (for an Aggregate
Total Not-to-Exceed $94,695.00).
Contact Person/Dept.: Nick Kimball,
Finance Department
Phone Number: (310) 253-6013
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [] Attachments: []
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (Email) Meetings and Agendas – City Council (09/04/2013); (Email)
NBS, MGT of America Inc., and Heinfeld, Meech & Co. PC (09/04/2013)
Department Approval:
Jeff Muir (09/03/13)
City Attorney Approval:
Carol Schwab (by H. Baker) (09/03/13)
Chief Financial Officer Approval:
Jeff Muir (09/03/13)
City Manager Approval:
John M. Nachbar (09/04/13) City of Culver City, California
Agenda Item Report
In California, user fees are subject to a number of state laws, most notably
Proposition 218 (November 1996), which essentially states that a “tax” cannot be
imposed without voter approval, and Proposition 26 (November 2010), which
clarifies that certain fees are not considered a “tax” and not subject to voter approval
(i.e. user fees, licensing and permitting fees, etc.). To comply with the various
regulations and provide the legislative body with sufficient information to determine
an appropriate subsidy policy, a study must be conducted periodically to determine
the full cost of providing each fee based service. The expertise and resources
required to perform such a comprehensive, in-depth study in a reasonable time
period necessitates the skills of an outside firm that specializes in this type of
analysis. To that end, Culver City issued a Request for Proposal (RFP) to conduct a
comprehensive user fee study in FY 2006-2007.
On June 23, 2008, the City Council approved a cost recovery policy and
implementation schedule for user fees, which is provided in the table below for City
Council’s reference. As illustrated in the table, the current overall cost recovery for
each fee area is at the cost recovery goal.
Since the initial study in Fiscal Year 2006/2007, staff has updated the fee schedule
annually to maintain the City’s cost recovery policy. However, the City has
undergone significant operational changes in the past seven years, including
reduced staffing levels and increased cost sharing of employee benefits. These
changes impact the underlying cost of service.
In recognition of these organizational changes on user fees, the Finance Department
requested, and City Council approved, one-time funds in the Fiscal Year 2013/2014
Budget to engage a firm to conduct another user fee study and update the City’s
cost allocation plan.
Department/Division
Current
Cost Recovery
Cost Recovery
Goal per Policy
Building & Safety
95% 95%
Engineering: Preferential
Parking
32% 32%
Engineering:
Other Fees
85% 85%
Planning
85% 85%
PR&CS: Recreation
49% 50%
Fire
75% 75%
Police
90% 90% City of Culver City, California
Agenda Item Report
DISCUSSION:
Staff released an RFP to prepare a user fee study and update the City’s cost
allocation plan on June 24, 2013. Proposals were received from three (3) qualified
firms by the due date of July 18, 2013. The firms that submitted proposals were
Heinfeld, Meech & Co. PC, MGT of America, Inc. (MGT), and NBS Government
Finance Group (NBS).
All firms were evaluated based on the following criteria:
1. Thoroughness of response and understanding of the task to be completed;
2. Responsiveness to requirements of the project;
3. Firm’s experience in financial studies, especially in California;
4. Overall experience of staff assigned to the project;
5. Time required to accomplish the requested services;
6. Client references; and
7. Cost of service.
Based on the Finance Department’s evaluation of the proposals, MGT and NBS
were selected as finalists. Both firms demonstrated a complete understanding of the
requested service, have extensive experience preparing user fee studies and cost
allocation plans in California, and proposed very experienced staff to provide the
service. The lead staff member for MGT conducted the last fee study in 2006 and
has been preparing the City’s cost allocation plan for almost 20 years. Overall, the
City has been satisfied with the service provided by MGT. However, NBS proposed
a lower fee to prepare the initial user fee study/cost allocation plan and a slightly
lower total five year cost:
Heinfeld, Meech
& Co. PC MGT of America NBS
Fee Study
& CAP
95,000 58,900 53,675
CAP only:
Year 2 25,000 9,000 10,255
Year 3 25,000 9,000 10,255
Year 4 25,000 9,200 10,255
Year 5 25,000 9,200 10,255
100,000 36,400 41,020
Total Cost 195,000 95,300 94,695 City of Culver City, California
Agenda Item Report
Staff also requested a copy of a recent user fee study and cost allocation plan
prepared by NBS and MGT. Staff found the NBS reports to be more readable and
user friendly for the layman (i.e. the public). Additionally, staff believes working with
a different consultant for these studies will result in additional perspectives and ideas
for consideration.
Therefore, staff recommends that the City Council approve a professional services
agreement with NBS Government Finance Group, dba NBS, to prepare a user fee
study and update the City’s cost allocation plan.
NBS will provide the following services as part of the user fees study:
• Identify the total cost of providing each City service/program and comparing
service costs with existing recovery levels;
• Recommend appropriate fees and charges based on analysis and any
appropriate subsidy level where full cost recovery may be unrealistic;
• Prepare a final report that identifies each program/service, its full cost,
recommended and current cost recovery levels, revenue impact, and fee
comparisons with up to 5 other LA County cities or other California cities
comparable to Culver City;
• Identify additional fees that the City may explore implementing, based on
practices of comparable cities providing a similar type of service;
• A detailed excel based computer model (including training for up to 4 staff) for
adjusting fees, including related schedules and cost documentation in a
format that can be edited and updated by City staff to accommodate changes
in the organization and/or costs; and
• Attendance at community and City Council meetings.
The study will address General Fund fees only (i.e. General Government, Public
Works, Community Development, Fire, Police, and PR&CS fees). Transportation,
Sewer, and Refuse fees will not be part of this study. It is expected that the study
will be completed by February 2014.
NBS will provide the following services to prepare the cost allocation plan:
• Develop an overhead cost allocation model in Microsoft Excel that reflects the
City’s organizational and financial structure;
• Generate annual allocated costs by budget unit and fund;
• Derive overhead/indirect rates by department and Citywide;
• Prepare a final report that includes:
o Executive summary;
o Citation of data sources and key analytical assumptions; City of Culver City, California
Agenda Item Report
o Illustration of analytical methods;
o Presentation of findings;
o Narrative descriptions; and
o Technical appendix showing the analysis and any relevant data
sources.
NBS will update the cost allocation plan with current data each year through Fiscal
Year 2018/2019.
FISCAL ANALYSIS:
The cost of the user fees study and cost plan update is $53,675. Sufficient funds
have been included in the City Council Adopted Budget for Fiscal Year 2013/2014.
The cost to update the cost plan in years 2 – 5 is $10,255 per year. That cost will be
included in future budget requests.
ATTACHMENT(S):
None
MOTION:
That the City Council:
1. Approve a professional services agreement with NBS Government Finance
Group, dba NBS to conduct a Comprehensive User Fee study and prepare a
cost allocation plan for an amount not-to-exceed $53,675.00 plus $10,255 for
each of the subsequent four years for updates to the Plan (for an aggregate total
not-to-exceed $94,695.00); and,
2. Authorize the City Attorney to review/prepare the necessary documents; and,
3. Authorize the City Manager to execute such documents on behalf of the City.