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Recommendation to receive supporting documentation into the record, conclude the hearing and adopt the resolution amending the Master Fee and Charges Schedule for specified City services for the City Clerk, City Prosecutor, Community Development, Development Services, Financial Management, Gas and Oil, Fire, Health and Human Services, Library Services, Long Beach Airport, Parks, Recreation and Marine, Police, and Public Works Departments. (Citywide)
DISCUSSION
As part of this action, the City Council is requested to consider two separate, but integrated reports about the City's cost recovery efforts for user fee services. The first report, the List of Proposed Fee Adjustments for the First Quarter Fiscal Year 2009 (FY 09) (Attachment A) describes the proposed changes to the City's Master Fee and Charges Schedule. The second report, the List of Proposed General Fund Fee Subsidies (Attachment B), identifies the remaining subsidies for the General Fund after the requested First Quarter adjustments.
• Proposed Fee Adjustments for the First Quarter of FY 09
On September 9,2008, as part of the budget adoption process for FY 09, the City Council approved an amended Master Fee and Charges Schedule for specified City services. The basis for this schedule of fees and charges is the Fee Study, which was originally recommended by the Budget Oversight Committee and commissioned by the City Council on June 3, 2004 to complete a cost accounting of the most significant City services and their related user fees, and which is updated annually to ensure full cost recovery for the City's services.
One of the findings of the Fee Study was that the City's process to offset its costs to provide fee-based services did not provide for an inflationary adjustment or other cost growth factors. Thus, some fees remained unchanged for decades resulting in a significant unintended subsidy, which was only addressed when a fee came back before the City Council. To provide for a more effective cost recovery, per the City Council's Financial Policy on User Fees and Charges, a mechanism to allow broad based changes to the City's fees became necessary. Hence, the Master Fee and Charges Schedule, along with quarterly fee updates, were initiated. City staff will continue to bring proposed fee adjustments on an ongoing basis to keep fees up to date. Please see Attachment A for a List of Proposed Fee Adjustments for the First Quarter of Fiscal Year 2009.
Proposed changes to the Master Fee and Charges Schedule involve several factors as follows:
City Council Financial Policy on User Fees and Charges: In order to comply with the City Council Financial Policy on User Fees and Charges, in FY 06, a goal of recovering 100 percent of the actual cost for user fee services was established. A three-year plan was put in place to gradually adjust the amount of the fees to ameliorate any impact on customers. The vast majority of fees met this cost recovery goal by the beginning of the FY 09; however, the preparation of the attached subsidy report did identify some fees that were still being subsidized. In reviewing the rationale for a continued subsidy, departments choose to adjust some fees to the actual cost rather than recommend a continued subsidy. Of the proposed fee adjustments, 261 are associated with the subsidy reporting effort. Without these changes, a subsidy of projected $263,000 would have continued.
It should be noted that the Health and Human Services Department also took this opportunity to make some final adjustments to their portion of the fee schedule to correct unintended subsidies. Health and Human Services has approximately 600 fees, which were set by a variety of methods in the past. Using the updated cost accounting methodology introduced in the Fee Study, Environmental Health took this information and conducted a thorough and comprehensive analysis of all of their fees. This evaluation also resulted in changes to the cost allocation, which altered the fee structure. This detailed and extensive reassessment resulted in some fees being increased and some decreased. This was intended to comply with the policy for full cost recovery, at the same time ensuring that the fee was appropriately set to cover all known direct and indirect costs only.
An additional 26 fees were adjusted for a variety of other reasons, such as the CPI adjustment to Environmental Services fees, and 47 parking citation charges were increased to address additional penalties imposed by the State of California on January 1, 2009.
Increased Service Demands: Certain new fees are being introduced to address the increased demand for City services. Charging a fee allows residents to enjoy the benefits of a service that may otherwise not be possible without sufficient revenue to offset the cost of providing the service. Changes in demand or impact may result in new fees being developed. Some services in low demand are not initially assigned a fee because of the cost of development of a billing process. As demand increases, the impact on the organization increases resulting in an improved cost/benefit ratio. In addition, services sometimes grow from a minimal impact to a larger impact resulting in the requirement to assign a cost to the service being provided. Of the fee adjustments being recommended, 29 are in response to increased service demands or to assist in cost recovery efforts.
Fee Deletions: Some fees have been recommended for deletion from the Master Fee and Charges Schedule. The specific reasons are addressed in Attachment A, which includes a listing of proposed fee deletions.
• General Fund Fee Subsidies
On September 9,2008, a request was made by the City Council to identify those fees that require a General Fund subsidy based on the estimated cost to provide each fee-based service. The City Manager indicated that the optimum time to produce this list of subsidies would be as part of the First Quarter Fee Adjustments process, since departments would be reviewing and adjusting their fees accordingly. Ordinarily, projected subsidies are only reported when a fee is included in the List of Proposed Fee Adjustments; however, Attachment B includes projected subsides for both current as well as proposed fees. To assist departments, subsidies were identified for those fees studied as part of the Fee Study, which considered the most significant fees within the City. In establishing and revising fees outside the Fee Study, departments are provided with the components of determining actual costs including direct costs, administrative overhead, indirect costs, and building costs on which to determine their individual costs for service.
Since the City Council does not review or approve fees for Parks, Recreation and Marine's General Fund supported activities, it did not participate in the development of Proposed General Fund Fee Subsidy Report. Given the additional time and support necessary to properly update their actual cost information for their user fee services, a plan has been developed to assist the Department in developing this information. Special Events and Filming cost recovery efforts, including filming fees, will be studied as part of this effort and any projected subsidy reported to the City Council, which has authority over whether the activity will continue to be subsidized. As soon as the analysis has been completed, a separate Parks, Recreation and Marine Subsidy Report will be submitted to the City Council with the Second Quarter Fee Adjustment requests.
A total projected subsidy of $557,933 has been identified by departments for their General Fund fees, not including Parks, Recreation and Marine fees. Per the City Council's Financial Policy, each Department has been asked to list the rationale for each fee subsidy. These justifications have been described for each fee, as well as the Program that will be impacted and the Department's Strategic Objective involved in Attachment B. An overview has also been included in the Fiscal Impact Section.
This letter was reviewed by Assistant City Attorney Michael J. Mais on January 2, 2009 and Budget Management Manager, David Wodynski on December 26, 2008.
TIMING CONSIDERATIONS
In order for the fee adjustments to be implemented and new revenue to be generated, the attached resolution must be adopted by the City Council. Therefore, City Council action is requested on February 3, 2009 to allow for increased cost recovery at the earliest possible time.
FISCAL IMPACT
Any General Fund revenue changes described in Attachment A are only estimates based on expected service usage. The City's FY 09 adopted General Fund revenue estimates assumed natural growth of fees and charges; therefore, the requested fee increases are required to meet current revenue commitments and to keep the General Fund balanced during the fiscal year. The total value of the annual revenue changes included in Attachment A in the General, CUPA, Airport, Health, Refuse and Towing Funds is approximately $4,644,928, of which $4,100,000 is for the airport, ambulance transport and parking citation increases.
Community Development
Code Enforcement
The Neighborhood Services Bureau's Code Enforcement Division is requesting changes to the Master Fee and Charges Schedule which was adopted by the City Council in September 2008. The changes, as shown in Attachment A, would clarify the appropriate fees for each of the programs listed in each of the categories in the Master Fee and Charges Schedule. The annual increase in General Fund revenue is estimated to be $13,435.
Economic Development
The purpose of the fee change is to cover costs associated with administering the Enterprise Zone program to provide for increased expenses associated with the increase in the number of vouchers processed and to pay for the expense associated with converting from a paper intensive application process to an electronic process. The increase in fees also provides for introducing the new expedited processing program to better serve the business community. The estimated annual increase in General Fund revenue is $265,100.
Financial Management
Parking Citations
Through December 31, 2008, the State of California imposed a penalty surcharge to every parking citation of $1.50 for State court construction. These funds are collected by the City and transmitted to the State. On January 1, 2009, Senate Bill 1407 (SB 1407) went into effect. SB1407 increased this penalty surcharge from $1.50 to $4.50. To address these additional pass-through costs, each parking citation will be increased by $3.00. Based on 390,000 citations issued in Fiscal Year 2008, the penalty collected for the State is anticipated to be $1,170,000. Without the requested citation increase, the General Fund would lose an equal amount of revenue annually. The City of Long Beach supported SB1407, since proceeds from this State action could assist in replacing the State courthouse located on Ocean Boulevard.
Business License
The Financial Management Department is making steady progress implementing on-going adjustments to Business License Fees. The Department will continue pursuing efforts to bring fees in line with costs, while maintaining one of our core strategic initiatives of being business friendly. Through periodic adjustments, the goal is to slowly eliminate all subsidies while minimizing the financial impact to local businesses. A healthier economic climate in the future should lead the City to become more cost efficient in its fees, when businesses are flourishing throughout the City. The estimated annual increase in General Fund revenue is $19,745. The remaining General Fund subsidy for Business License Fees is $142,874 annually.
Fire Department
Ambulance Transport
Ambulance Transport rates are being increased to match those of Los Angeles County. For numerous years the City has matched the County's rates. A new fee is also proposed for a new service offered for Continuous Positive Airway Pressure (CPAP) Treatments; the fee will recoup costs associated with providing this new service to patients. The annual increase in General Fund revenue from these fee changes is estimated to be $713,750.
It is important to note, however, that ambulance transport services do not historically collect 100 percent of fees resulting in a significant write-off of $8,943,727 in FY 08. This write-off is due to the difference between the billed amount and capped Medicare and Medical reimbursement rates, as well as other patient factors outside the City's control such as indigence, inability to pay, bankruptcy, death, etc. For purposes of this report, the uncollectible amount is not reflected as a subsidy since Medicare and Medical rates would still cap reimbursement to the City even if rates were increased.
Development
New Construction Plan Review and Permit fees were advertised to be changed; however, due to potential revisions to the way the City will deliver this service, the fees are not proposed to be changed.
As part of the City's effort to become more business-friendly, to remain competitive and in response to the major downturn in development activity, fees pertaining to development activities were not increased in FY 09. As a result, these services receive a projected General Fund subsidy of $276,471.
Department of Health and Human Services
Environmental Health and Preventive Health
For FY 09, the Department of Health and Human Services underwent a comprehensive line-by-line review of all current fees in the Environmental Health programs and in the court-ordered HIV education program (Preventive Health), with the goal of maintaining quality service to the residents of Long Beach while aligning costs with specific fees for service to eliminate subsidies in the fee structure. As a result, of the 125 fees adjusted, 56 (45 percent) resulted in a decrease in the fee amount, while 69 (55 percent) are fee increases. With the requested fee changes, revenue to the Health Fund will be enhanced by an estimated $20,542 and will be more properly aligned with actual costs.
Animal Care Services
The proposed changes to the FY 09 fees reflect full cost recovery on the majority of services provided to residents of Long Beach and the four contract cities (Signal Hill, Cerritos, Seal Beach and Los Alamitos). These changes result in an additional $37,561 in fee revenue to the General Fund. Fee levels also include the development of new programs, including microchipping and door-to-door license canvassing to better promote the mission of Public Safety and the Humane Treatment of Animals, as well as the implementation of an administrative citation program to encourage greater compliance with local laws.
The Health and Human Services Department is recommending a subsidy for a portion of the Breeding Enforcement Program. Each year over 12,500 animals are abandoned or impounded at the City Shelter. The average cost for animal care at the Shelter is $161 per animal. Curbing the illegal breeding and selling of animals in the City of Long Beach is an important strategy for improving public health and reducing the costly flow of thousands of animals in the City Shelter. Over the coming months, administrative citations will provide Animal Control Officers with the tools to enforce regulations and generate revenue that will offset the costs of the program. Currently, the program is contributing over $27,000 a year from indirect revenues (licenses, impound fees and penalties for unaltered animals) and achieving even greater cost avoidance. The total subsidy projected for this program is $109,550.
Library Services
The Department of Library Services is requesting changes to the Master Fee and Charges Schedule pertaining to the rental of library rooms and meeting areas for an estimated total revenue impact of $3,965 for the General Fund. The increase in charges aligns the fees to the low end of the competitive market rates at neighboring jurisdictions.
Long Beach Airport
On September 11, 2007, the City Council approved increasing the Passenger Facility Charge (PFC) from $3.00 to $4.50 per enplaned passenger, but was not included in the FY 09 Adopted Budget. The Master Fee and Charges Schedule needs to be amended to reflect this change. It is estimated that the $1.50 increase will result in approximately $2,200,000 additional annual revenue to the Airport Enterprise Fund to be used for the Airport Capital Improvement Program.
Parks, Recreation and Marine
The intention of the Parks, Recreation and Marine Department was to establish fees for permits to gather in the Tidelands area. The fee is $150 for groups with over 200 attendees. During the FY 09 Budget Adoption process, a transcription error led to the fee being established at $15.00. The proposed Master Fee and Charges Schedule corrects this technical error.
Police
The Police Department recommends the continued subsidies for the following fees:
Charitable Solicitation, Rummage Sale, and Taxi Owner fees. Charging full cost would increase the fee costs significantly and deter voluntary compliance for obtaining the respective permits. The estimated annual General Fund subsidy is $29,039.
Public Works
Engineering Bureau
All remaining fee subsidies have been eliminated and all fees have been CPI adjusted to account for increased costs. The expected full-year annual General Fund revenue increase is $167,810.
Environmental Services Bureau
These changes reflect the annual CPI adjustment to the refuse services rates as called for in the Environmental Services Rate Resolution. The increase would be approximately $3,920.
Towing
Towing has implemented two new fees to support their services resulting in annual revenue of $4,100 to the Towing Fund. In conjunction with the Police Department, the Vehicle Notification Fee is being implemented for a General Fund revenue increase of $25,000.
SUGGESTED ACTION
Approve recommendation.
BODY
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LONG BEACH AMENDING THE MASTER FEE AND CHARGES SCHEDULE FOR SPECIFIED CITY SERVICES FOR THE CITY CLERK, CITY PROSECUTOR, COMMUNITY DEVELOPMENT, DEVELOPMENT SERVICES, FINANCIAL MANAGEMENT, FIRE, GAS AND OIL, HEALTH AND HUMAN SERVICES, LIBRARY SERVICES, LONG BEACH AIRPORT, PARKS, RECREATION AND MARINE, POLICE, AND PUBLIC WORKS DEPARTMENTS
Respectfully Submitted,
LORI ANN FARRELL
DIRECTOR OF FINANCIAL MANAGEMENT/CFO
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PATRICK H. WEST |
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