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CC Resolution 9213 RESOLUTION NO. 9213 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CAMPBELL APPROVING THE USER FEE AND COST RECOVERY POLICY, ACCEPTING THE DMG USER FEE STUDY UPDATE, COST ALLOCATION PLAN, AND OMB A-87 COST PLAN, AND PROVIDING RELATED STAFF DIRECTION WHEREAS, the City of Campbell Financial Policies require an annual evaluation of the Schedule of Fees and Charges; and WHEREAS, a User Fee Study was originally conducted in April 1989 by David M. Griffiths & Associates (DMG); and WHEREAS, the City Council of the City of Campbell entered into an agreement with DMG to complete an update of the 1989 User Fee Study as well as the preparation of a cost allocation plan and an OMB A-87 plan for the City of Campbell; and WHEREAS, the User Fee Study Update and related Cost Allocation Plans have been presented to the Council Finance and Revenue Enhancement Sub-Committees; and WHEREAS, a User Fee and Cost Recovery Policy has been prepared to establish a framework related to fees, charges, and cost recovery percentages. NOW, THEREFORE BE IT RESOLVED that the User Fee and Cost Recovery Policy be approved; that the DMG User Fee Study Update be accepted; that the DMG Cost Allocation and OMB A-87 Plans be accepted; and that staff be directed to update the computerized user fee and cost allocation model annually for the purpose of establishing the basis for projections in development of the annual budget; and that staff be directed to incorporate within the annual Fee Schedule, the current and proposed fees, the current and proposed cost recovery percentages, and the dollar amounts associated with under-recovered costs. PASSED AND ADOPTED this 1st day of April 1997, by the following roll call vote: AYES: Councilmembers Dougherty, Watson, Dean, Furtado, Conant NOES: Councilmembers None ABSENT: Councihnembers None APPROVED: ~ ~~yor A~ Anne Bybee, City Clerk 2.6 User Fee and Cost Recovery Policv A) Purpose of Policy The purpose of this policy is to provide the framework and guidelines by which the annual fee schedule, cost recovery percentages, and/or new user fees and charges are determined. Additionally, this policy demonstrates to the public that a process is followed rather than generally recovering 100% of costs eligible for recovery through user fees and charges. This Policy shall be inserted into the Council Policy binder as Section 2.6, and the Schedule of Fees will serve as an addendum to this Policy. As required by the City's Financial Policies, user fees and charges shall be reviewed and updated on an annual basis to ensure they keep pace with changes in the cost of providing related services and/or changes in methods or levels of service delivery. This Policy both complements existing Council and administrative policies and further clarifies the criteria to be utilized in evaluating user fees and charges. B) User Fee Cost Recovery Levels The City provides a variety of services for which user fees and charges are collected in an attempt to recover a portion or all costs related to the service being provided. User fees and charges can be broadly defined as non-tax revenue sources where payments made are in direct exchange for services rendered to a specific beneficiary. Such payments can generally be avoided by not using the service in comparison to tax revenues which cannot be avoided. This definition should not be confused with definitions provided in Proposition 218 - The Right to V ote on Taxes. The Proposition specifically excludes developer fees as well as non-tax fees and charges such as those discussed within this Policy. When establishing appropriate levels of cost recovery it is important to quantify the costs related to the services being provided; determine whether the costs are reasonable; justify current recovery levels; and the changes necessary to effect the approved cost recovery levels. In determining and/or reviewing cost recovery levels for user fees and charges, the following specific factors will be considered: 1. Beneficiary of Service Provided In general, the level of user fee cost recovery shall consider the beneficiary of the specific program, activity, or service being provided. Public Safety is an example of a service typically funded with general purpose (tax) revenues as the community is clearly the beneficiary. Other regulatory processes such as building and planning services generally produce some community-wide benefits, therefore, it is appropriate that fees be reflective of this. As a result of this consideration, it is feasible that while a high level of cost recovery is appropriate, fees may not recover 100 % of the cost of providing the service. 2. Service Recipient -vs- Service Driver After considering the beneficiaries of the service being provided, the concept of service recipient versus service driver must also be considered. For example, an applicant for review or inspection of a specific project is both the direct recipient of the service as well as the driver of costs associated with review or inspection of specific project. Without the applicant desiring to develop a particular project, the related review and inspections would not be performed by the City. As such, a very high level of cost recovery for services provided to the applicant is appropriate. 3. Effect of Pricing on the Demand for Services and the City's Ability to Meet the Demand The level of cost recovery and related pricing of services can significantly influence the demand and subsequent level of services provided and shall be a consideration when establishing and/or reviewing user fees and charges. At full cost recovery, this typically has the specific advantage of ensuring that the City is providing services for which there is genuinely a market that is not overly stimulated by artificially low prices. Demand can be artificially high for services that are under priced. Conversely, high levels of cost recovery may negatively impact the delivery of services to low-income individuals or groups. This negative feature is especially pronounced and can work against public policy, if the services are specifically targeted to those lower-income individuals or groups. "At risk youth" would be an example. 4. Feasibility of Collection and Recovery Although it may be determined that a high level of cost recovery is appropriate for specific services, it may also be impractical or too costly to establish a system to identify and charge the user. Accordingly, the feasibility of assessing and collecting charges shall also be considered when establishing and/or reviewing user fees and charges. C) Waiver of User Fees and Charees and Special Assistance Considerations Unless otherwise specified within the City Code, the City Manager or his/her designee shall have the discretion to waive fees and charges up to $2,500 per instance on a one-time or limited basis. 1. Special Circumstances Council Policy provides for fee waivers for special circumstances. Groups desiring fee waivers must petition the City Council and be heard at a regular Council meeting. An example would be Community Special Events. Generally, the City's out-of-pocket expenses will be this recommended to be recovered. 2. Financial Assistance Program A Financial Assistance Program is available to Campbell youth and senior citizens for participation in Recreation and Community Services Department programs. Eligibility is based on residency, age, and financial need. A sliding scale of program subsidy is based on H. U. D. ' s financial assistance formula. Funds for this program are provided through private donations. 3. Developer Assistance Consistent with the Redevelopment goals and objectives of revitalizing the Central Campbell Redevelopment Project Area, there may be circumstances in which the City Council/Redevelopment Agency Board may waive specified development permit fees as an incentive to attract desirable business downtown. Therefore, the City Council/Agency Board may waive development permit fees consistent with the terms and conditions of the Downtown Business Assistance Policy adopted by Resolution 9168 (City Council) and Resolution 1996-13 (Redevelopment Agency). D) Criteria for Establishine Services With Lower Cost Recovery Levels When establishing and/or reviewing user fees and charges, it is important to consider programs, activities, or services that favor goals of low or no cost recovery. In selected circumstances, there may be specific activities within the broader scope of services that should have user fees and charges associated with them. However, the primary source of funding for no or low cost recovery services typically comes from general purpose revenues as opposed to user fees and charges. The best examples of no or very low cost recovery services are public safety services such as fire and police. Reduced levels of cost recovery are considered appropriate under the following circumstances: 1. Collection of user fees and charges are neither cost-effective nor will such recovery significantly benefit or impact the ability to provide the service effectively or efficiently. 2. There is no intent to limit the use of (or entitlement to) the program, activity, or service, or there is no direct relationship between the amount paid and the benefit received. 3. The service is non-recurring, generally delivered on a "peak demand" or emergency basis, cannot reasonably be anticipated on an individual basis, and is not readily available from a private sector source. Many public safety (police and fire) services fall into this category. 4. Lower cost recovery levels are typically established for those services where full cost fees and charges might discourage compliance with regulatory requirements and/or the cost of enforcement far exceeds the benefit derived from collecting the fee or charge. Although there typically aren't many services that fall into this category, in the few that do, the public's adherence to regulations is primarily self-imposed, and as such, failure to comply may not be readily detected by the City. Small-scale licenses and permits such as animal and bicycle licenses are examples of services that might appear in this category. E) Criteria For Establishine Services With Hieh Cost Recovery Levels When establishing and/or reviewing user fees and charges, it is also important to consider programs, activities, or services that favor high cost recovery goals or levels. User fees and charges are generally collected to recover most or in some cases all of the costs associated with providing such service levels. These are especially appropriate under the following circumstances: 1. The service is of special benefit to an individual(s) or group(s) and/or a service- driver is primarily responsible for the costs being incurred. Planning, building, and engineering permits typically fall into this category. 2. The service is regulatory in nature and a method other than voluntary compliance is necessary as the primary method of ensuring that regulatory requirements are adhered to. Services related to enforcement of the Uniform Building Code and/or Hazardous Materials Codes are applicable examples of services that favor high cost recovery. 3. The service is similar to those provided in the private sector or where other private or public sector service providers actually could or do exist. Day care and fitness facilities might be examples of services that fall into this category. 4. It is intended for equity or demand management purposes, that there be a direct relationship between the amount paid and the level and cost of the service received. The use of the service may be discouraged. False alarms responses are examples of services that would typically fall into the high cost recovery category. 5. The use of the service is specifically discouraged. F) General Concepts Rez:ardine Development and Implementation of User Fees and Charz:es In addition to the more specific policy guidelines, the following general concepts will be utilized in establishing, reviewing, and implementing user fees and charges: 1. Cost recovery goals shall be based on the total cost of delivering the program, activity or service including direct labor and indirect costs such as departmental and City-wide administrative overhead, utilities, and organization-wide support costs such as accounting, personnel, data processing, maintenance, and insurance. 2. Revenues collected through fees and charges shall not be in excess of the total cost of providing the program, activity, or service. 3. The method of assessing and collecting fees should be as efficient as possible in order to minimize the administrative cost of collection. During the annual review process, such things as increases or decreases in the volume of activity as well as inflationary factors shall be considered so as to make the revenue projection as accurate as possible. 4. Rate structures should be sensitive to the "market rate" for similar services. Surveys should be taken periodically as a basis for comparison. 5. A consistent approach shall be utilized in establishing or reviewing cost recovery levels for various programs, activities, and services. G) Recreation Services Cost Recovery Guidelines and Subsidy Levels Recreation programs run the gamut from high cost recovery which is synonymous with low subsidization to low or no cost recovery which is synonymous with high subsidization. Because of this variety of cost recovery ranges, specific guidelines for recreation programs have been established. The demand for most recreation programs is extremely elastic whereby the demand for a program falls as the price increases. Because of this elasticity of demand, almost all recreation programs generally have some level of subsidy. The following cost recovery policies shall apply to the City's recreation programs: 1. Adult recreation programs will have a high level of cost recovery. 2. Youth and Senior Citizen recreation programs will have a lower level of cost recovery than general recreation programs with a maximum subsidy level of 75 % or a minimum cost recovery level of 25 %. Although ability to pay may not be a concern for all youth and senior participants, these are desired program activities within the community and the City's Strategic Plan, and the cost of determining need may be greater than the cost of providing a uniform service and fee structure to all participants. Further, there is a community-wide benefit in encouraging high-levels of participation in youth and senior recreation activities regardless of ability to pay. 3. The overall cost recovery goal for recreation programs is 50% resulting in a maximum subsidy level of 50 %. The basis for determining costs shall be the 1996 "User Fee Cost Recovery Study Findings" prepared by David M. Griffith and Associates, Ltd. (DMG) and all subsequent updates. Departmental administrative overhead shall be recovered, and all recreation programs shall recover direct operating costs. The cost of the Community Center debt service and City administrative overhead shall be excluded from the cost recovery calculation for recreation fees and charges. 4. In lieu of a differential in rates between residents and non-residents, residents have preferential sign-up times. 5. In conformance with the annually adopted Fee Schedule, charges will be assessed for use of facilities and equipment for activities not sponsored or co-sponsored by the City. 6. Activities deemed to benefit the community at large will be identified and may be excluded from the user fee policy. H) Development Review Proa:rams 1. Services provided under this category include but are not limited to: a. Planning (planned development permits, tentative tract and parcel maps, rezoning, general plan amendments, variances, use permits); b. Building and Safety (building permits, structural plan checks, inspections); and/or c. Engineering (public improvement plan checks, inspections, sub-division requirements) . 2. Cost recovery for these services should be very high. Exceptions to this standard include any specific review process that is clearly intended to serve the broader community as well as the applicant. 3. The City shall establish and maintain standards for its performance to ensure there is value received for the cost of user fee services provided. I) Comparability With Other Communities 1. Surveying the comparability of the City's fees and charges to other communities or other service providers furnishes useful background information for several reasons: a. Surveys are reflective of the "market" for these fees and can aid in assessing the reasonableness of Campbell's fees. b. If prudently analyzed, surveys can serve as a benchmark for how cost- effectively and efficiently Campbell provides its services. 2. Fee surveys should, however, never be the sole or primary criteria in setting City fees as there are many factors that affect how and why other communities have set their fees at their levels. For example: a. Are cost recovery goals consistent between survey agencies? b. What costs have been considered in computing the fees? c. When was the last time fees were comprehensively evaluated and/or updated? d. What level of service is provided compared with Campbell's service levels and performance standards? e. Are rate structures comparable between survey agencies? These can be very difficult questions to address in fairly comparing fees between different communities. As such, the comparability of our fees to other communities should be only one factor among many that are considered in setting City fees.