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Receive a Report and Presentation City’s User Fee Study and Provide Feedback
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Meeting Date: September 25, 2024
Contact Person/Dept: Michael Towler/Finance Department
Phone Number: (310) 253-5865
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [X] Attachments: []
Public Notification: (E-Mail) Meetings and Agendas - Finance Advisory Committee (09/19/2024)
Department Approval: Lisa Soghor, Chief Finance Officer (9/19/2024)
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RECOMMENDATION
Staff recommends the Finance Advisory Committee (FAC) receive a presentation on the City’s User Fee Study and provide feedback.
BACKGROUND / DISCUSSION
The City Council’s Adopted 2018-2023 strategic planning goals included addressing the long-term financial stability of the City by reviewing existing revenue sources. This strategic goal was carried forward into the City’s Adopted Strategic Goals for 2024-2029. As key General Fund revenue sources, program user fees and regulatory permits were identified to be analyzed. The City of Culver City most recently conducted a comprehensive cost of services and user fee study in Fiscal Year 2013-2014 and has not increased fees in the last decade since that Master Fee Schedule was adopted. However, in the past 10 years, the City has experienced significant increases in program costs coupled with changes in Departmental operations. In 2023, staff engaged a consultant, NBS Government Finance Group (“NBS Gov”), to assist the City with conducting an updated comprehensive user fee and cost of services analysis.
California municipalities may impose user and regulatory fees for services through provisions set forth in the State or California Constitution, Article XIII C 1. Under this legal framework, a fee may not exceed the reasonable cost of providing the service or performing the activity. In addition, Culver City City Council Policy No. 5002 calls for a comprehensive user fee and cost of services study to ensure that fees continue to meet cost recovery targets.
The Finance Department worked with NBS Gov and representatives from all City Departments to prepare the study through the following phases of work:
• Phase I - initiated a review of the organizational workload, as well as time on task data needed to calculate the cost of providing each fee for service. Department staff were asked to review and provide time estimates spent on various activities and services performed on an annual basis, as well as on each individual fee for service activity.
• Phase II - updated the draft fee model to reflect all identifiable direct and indirect cost of providing services. This included incorporation of all applicable indirect costs such as those included in the City’s Cost Allocation (Administrative Overhead) Plan.
• Phase III - met with City Department staff to review the results of the inputs and analysis. This included updating the model to account for necessary adjustments, corrections, and revisions to data and time estimate validation.
• Phase IV - performed a comparative fee survey of recommended fee amounts to neighboring jurisdictions to better understand how Culver City to provide a sense of what the market rates are for comparable services or programs. This allowed staff to understand how other jurisdictions addressed cost recovery targets and provided insight on how and when other jurisdictions decided to provide program subsidies that resulted in reduced fees.
• Phase V - prepared a draft comprehensive written report (provided as Attachment 1) that describes the complete work in detail.
A copy of the Draft Fee Study is attached to the staff report for review. It includes the new, proposed fees and information on the proposed cost recovery rates as recommended by staff.
The City currently recovers approximately $13.3 million each year from fees. This results in an effective cost recovery rate of 56%. The Draft Fee Study identified an estimated $24 million in eligible costs for recovery from fees for services which would yield an additional $10.7 million at 100% full cost recovery amounts.
Ultimately, the City Council must decide the appropriate cost recovery targets for the City’s fee structure. As the report explains, there may be other, local policy considerations that support adopting fees at less than the calculated full cost recovery amount. With these considerations in mind, the Draft Fee Study includes initial recommended fee amounts for consideration and feedback that would result in an additional $2.1 million in costs to be recovered, for a total cost recovery rate of 64% for services provided.
Nicole Kissam from NBS Gov will present a summary of the process, the methodology and the Draft Fee Study during the meeting.
Staff recommends that FAC provide feedback on the Draft Fee Study and the proposed recovery rates, in particular.
The Draft Fee Study along with the FAC’s feedback will be presented to the Audit, Financial Planning, and Budget Subcommittee. After the Subcommittee Meeting, the City Council will conduct a study session to review the Draft Fee Study and provide direction on the proposed fees and cost recovery rates.
At a subsequent City Council meeting, the City Council will hold a public hearing to consider adopting the Master Fee Schedule. Annually thereafter, the Finance Department will bring an updated Fee Schedule to the City Council for approval.
ATTACHMENTS
ATT_1_2024_09_25_DRAFT Citywide User Fee Study
MOTION
None.