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HomeMy WebLinkAbout06/21/2005, PH 2B - 2005-07 FINANCIAL PLAN: ADOPTION OF FEE AMENDMENTS counat 6-21-OS ac En c�a LnEpont ,�N°.� C ITY O F SAN L U I S OBISPO FROM: Bill Staffer, Director of Finance& Information Technology SUBJECT: 2005-07 FINANCIAL PLAN: ADOPTION OF FEE AMENDMENTS CAO RECOMMENDATION Adopt a resolution amending the City's master fee schedule. DISCUSSION Background. As an integral part of the City's General Fund budget balancing strategy for 2005- 07, the Council has conceptually approved increases in several General Fund fees for police, recreation, development review and general government services, which were presented in detail to the Council as part of the April 19, 2005 "strategic budget direction" report. As shown in the chart below, while expenditure reductions play the leading budget-balancing role-accounting for about three-quarters of the solution in closing an estimated $2.1 million gap-new revenues are 2005-07 Budget Balancing Actions also an important part (20%) of the solution. Closing the General Fund Gap:52.1 Million D Revenues These fee increases total about $445,000 annually . 20% D CiP ss°i° on average over the next two years, and are covered by the attached resolution (Attachment 1). D ReseNes .. 8% Summary of Proposed Fee Increases. As noted - Expenditures:72% above, all of the proposed fee increases have been extensively analyzed and reviewed by the Council at a number of public workshops and hearings. The following summarizes the proposed changes, D operating which are described in detail in Attachment 2 Programs 340% (which is an excerpt from the April 19 report). New RevenuerSurinmary Fiscal Year Annual 2005-06 2006-07 Average Vehicle Tow Release Fee 34,300 42,500 38,400 Third False Alarm Fee 45,800 45,800 45,800 Property Damage-Only Collision Investigations 82,300 82,300 82,300 Facility Use Fees 48,800 48,800 48,800 Triathlon 3,000 3,000 3,000 Airport Land Use Commission Review 10,300 12,400 11,400 Waterway Management Plan/NPDES Compliance 50,000 60,000 55,000 Replacement Business Tax Certificate 3,900 3,900 3,900 Business Location Change 10,300 10,300 10,300 Business License Program 37,800 _ 254,800 1 1461300 TOTAL_ _ $326,500 $5639800 1 $445,200 a1 2005-07 Financial Plan: Adoption of Fee Amendments Page 2 Effective Dates. Effective dates are noted for each fee in Exhibit A of the attached resolution. In most cases, fees are scheduled_ to be effective July 1, 2005. However, under State law, development-related fees cannot become effective until 60 days after their adoption. For ease of implementation, we recommend an effective date for these fees that begins at the first of the month following this 60 day period: September 1, 2005. For "start-up" reasons, we also recommend that the Triathlon and business license fees also have an effective date of September 1, 2005. FISCAL IMPACT As noted above, the City's budget-balancing strategy and the resulting Preliminary Financial Plan reflect the implementation of these revenues. Any significant changes from these will require revisiting the expenditure reductions and other budget-balancers reflected in the Financial Plan, which is also proposed for adoption on June 21, 2005. ALTERNATIVES Although the Council has already conceptually approved all of these changes, the option certainly exists not to implement some or all of these. However, a decision not to implement them will require deeper reductions to the significant service and cost reductions already reflected in the Financial Plan, which were arrived at after many months of extensive public workshops and hearings. ATTACHMENTS 1. Resolution amending the City's master fee schedule 2. Description of proposed fee amendments (excerpt from April 19, 2005, "strategic budget direction"report to the Council) G:Budget Folders/Financial Plan/2005-07/Financial Plan/Fees/Amendments to Master Fee Schedule/Agenda Report,6-21-05 ar-2 Attachment 1 RESOLUTION NO. (2005 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO AMENDING THE CITY'S MASTER FEE SCHEDULE AS PART OF THE 2005-07 FINANCIAL PLAN PROCESS WHEREAS, it is the policy of the City of San Luis Obispo to review service charges on an ongoing basis and to adjust them as required to ensure that they remain adequate to achieve adopted cost recovery goals; and WHEREAS, in accordance with this policy the Council adopted Resolution No. 9130 on November 21, 2000 updating the City's updated master fee schedule on a comprehensive basis; and WHEREAS, the Council considered amendments to the master fee schedule at a public hearing on June 21, 2005 as part of the 2005-07 Financial Plan process based on a detailed analysis of costs and funding requirements to meet adopted cost recovery goals. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo that the City's master fee schedule is hereby amended as set forth in Exhibit A. Upon motion of seconded by and on the following roll call vote: AYES`: NOES: ABSENT: the foregoing resolution was adopted on June 21, 2005. Mayor David F. Romero ATTEST: Lee Price, City Clerk APPROVED AS TO FORM: Jo t . Lowell, City Attorney a26-3 Resolution No. (2005 Series) Attachment 1 Page 2 Exhibit A AMENDMENTS TO THE MASTER FEE scHEWLE PUBLIC SAFETY: POLICE SERVICES Vehicle Tow Release Fee Effective July 1, 2005 $96.00 per tow, payable by the registered vehicle owner. False Alarm Fees Effective July 1, 2005 First and Second False Alarm No Fee Third False Alarm $65.50 Fourth False Alarm 107.30 Fifth False Alarm 175.40 Sixth False Alarm 306.90 Seventh and Subsequent False Alarms 499.10 Property Damage-Only Collision Investigations Effective July 1, 2005 $50.00 per party per non-injury traffic collision investigation. PARKS AND RECREATION Added Charge for Programs Using School District Facilities Effective July 1, 2005 $0.25 per person per use charge on all programs using San Luis Coastal Unified School District facilities. Universal Triathlon Registration Fee Effective September 1, 2005 Resident $64.00 Non-Resident 64.00 Resolution No. (2005 Series) Attachment 1 Page 3 Exhibit A -AM-ENDMEINTSTOT-H-E MASTER FEE SCHEDULE; COMMUNITY DEVELOPMENT Airport Land Use Commission (ALUC) Plan Review Fee Effective September 1, 2005 Per Application Administrative Reviews $100.00 Reviews Requiring ALUC Hearing 400.00 Waterway Management Plan Fee Effective September 1, 2005 A surcharge of 7% shall be added to the plan check and building permit fee for projects subject to the Waterway Management Plan and the storm water management program. GENERAL GOVERNMENT Replacement Business Tax Certificate Fee Effective July 1, 2005 $31.00 Business Change of Location Fee Effective July 1, 2005 $103.00 Business License Fees Effective September 1, 2005 New Applications Located in the City * $108.00 Located outside of the City 36.00 Annual Renewals 31.00 Note: Applications for Home Occupation Permits are not subject to this fee, as this would duplicate the fee already charged for this review. 2005-07 Financial Plan Attachment 2 DESCRIPTION OF - FEE SCHEDULE AMENDMENTS OVERVIEW The following summarizes proposed amendments to the City's master fee schedule. These were approved by the Council as part of the "strategic budget strategy" report presented to them on April 19, 2005; and conceptually endorsed by the Council during its review of the Preliminary 2005-07 Financial Plan. New Revenue Summary. In light of the City's fiscal situation, we believe that the proposed new revenues are reasonable in avoiding even deeper cuts in essential services. They are all consistent with the City's user fee cost recovery policy; and although they play an important role in the overall budget New Revenue Summary balancing strategy, they are only about D other New 20% of the solution, with expenditure Revenues reductions playing the leading role (70% 80/0 of the solution). o Recreation O Police Fees Fees W/o As reflected in the sidebar chart, two of 1P/0 the revenue recommendations - police related fees and business licenses - o Development Review account for two-thirds of the new 14% revenue recommendations.. o Business We believe that fees in these two areas License are especially warranted in light of the 3Fk limited cost recovery options for police services (and their heavy reliance on general-purpose revenues) and the value New ReVertub Summary of the City's public safety and Fscal Year annual infrastructure maintenance services to 2005-06 2006-07 Average the business community in the case of Vehicle Tow Release Fee 34,300 42,500 38,400 the business license revenues. Third False Alarm Fee 45,800 45,800 45,800 Property Dam age-Only 82,300 82,300 82,300 Without the proposed new revenues, we Collision Investigations will need to cut even deeper into our Facility Use Fees 48,800 48,800 48,800 Triathlon 3,000 3,000 3,000 operating and capital programs. Airport Land Use 10,300 12,400 11,400 Commission Review Projected Revenues. As reflected in NPDES Compliance 50,000 60,000 55,000 the sidebar chart, we are proposing new Replacement Business 3,900 3,900 3,900 or increased revenues in ten areas. Tax Certificate Over average over the next two years, Business Location Change 10,300 10,300 10,300 these added revenues will generate Business License Program 37,800 254,800 146,300 TOTAL $326,500 $563,800 $445,200 about$445.000 annually. Report Organization. For each of the proposed new revenue sources, this report provides the following information whenever applicable: 2005-07 Financial Plan Attachment 2 DESCRIPTION OF MASTER FEE SCHEDULE AMENDMENTS 1. Background 2, Description of the Proposed Fee 3. Cost Summary 4. Proposed Fee Schedule 5. Estimated Revenues 6. Consistency with User Fee Cost Recovery Policy 7. Practices in Other Cities 8. Customer Service Impacts VEHICLE TOW RELEASE FEE As part of the November 18, 2004 report on "pantry items," the Council approved higher cost recovery for the Police Department's efforts related to vehicle tows. These occur for several reasons, including: 1. Driver is arrested and taken into custody 2. Blocking driveway entrance 3. Parking on lawn 4. Abandoned vehicle 5. Preventing access by firefighting equipment by parking too near to a fire hydrant 6. Person in charge of vehicle is incapacitated 7. Area posted for"no parking" We do not currently charge this type of fee, but are allowed to do so under California Vehicle Code Section 22850.5. Because of this, many other cities charge a towed-vehicle release fee, with the most common one set at a $100 flat fee. Our proposed vehicle release fee is $96, payable by the registered vehicle owner, summarized as follows: Vehicle Tow Cost Summary Percent Billable Personnel Minutes of Hour Rate Cost Police Officer 20 0.330 101.32 33.44 Communications Technician 10 0.160 53.46 8.55 Records Clerk 10-15 0.250 42.36 10.59 Police Sergeant 15-20 0.330 126.45 41.73 Accounting Assistant 2-3 0.041 46.85 1.92 Cost Recovery Fee $96.23 Over the past three years, we have towed an average of 750 vehicles annually that would have been applicable to a tow release fee. Assuming a conservative collection rate of 85% (most owners will want to claim their vehicles), estimated annual revenues are$62,500. When we presented this idea to the Council in November 2004, we conservatively estimated revenues from this fee at $20,000 annually. Since this initial estimate was included in the December Forecast, the net "added" revenue from this fee as a "budget-balancer" is $42,500. -2- ag.7 2005-07 Financial Plan Attachment 2 DESCRIPTION MASTER FEE SCHEDULE AMENDMENTS Due to the time needed to implement this fee, first-year collections in 2005-06 are estimated to be slightly less than this amount($34,500). 1. Consistency with user fee cost recovery policy. This is consistent with the City's policy that those who drive the need for a service — especially one that we want to discourage — should incur the cost. 2. Practices in other cities. As noted above, towed-vehicle release fees are common in California cities, with the rate typically set at$100 per tow. 3. Customer service impact. We believe that the proposed fee is reasonable in the context of the costs we incur. Moreover, as reflected in the above summary of when we initiate vehicle tows, these are behaviors we want to discourage, and as such, full cost recovery is appropriate. FALSE ALARM FEES The Police Department responds to security alarms in the City at both business and residential locations. The majority of alarm responses are due to false alarms, which are caused by a number of factors, including: 1. Window left open and the wind causing motion that is sensed by the alarm system 2. Interior motion from a mouse, bird or pet. 3. And the most common cause: user error. Businesses particularly have a high number of false alarms from user error resulting from lack of on-going employee training and high employee turn-over. The Police Department responds to approximately 2,200 false alarms annually: 1,500 business and 700 residential. Currently, the City charges a $107.30 false alarm fee beginning with the fourth false alarm in a twelve-month period, increasing with each false alarm to $306.90 for thesixth and any subsequent false alarms. Implementing a modest "thud false alarm fee" of$65.50— and increasing the fee amount for the most extreme number of repeat false alarms (by $192.20 to $499.10) for the seventh and subsequent false alarm in a twelve-month period— will bring the City's false alarm fee schedule in-line with comparable cities and partially off-set the costs of police resources in responding to false alarms. The following summarizes the current and proposed false alarm fee schedule: False Alarm Fees Current Proposed Increase First and Second False Alarm No Fee No Fee No Change Third False Alarm No Fee 65.50 65.50 Fourth False Alarm 107.30 107.30 No Change Fifth False Alarm 175.40 175.40 No Change Sixth False Alarm 306.90 306.90 No Change Seventh and Subsequent False Alarms 306.90 499.10 192.20 -3 - 2005-07 Financial Plan Attachment 2 DESCRIPTION OF - FEE SCHEDULE AMENDMENTS Net revenues (after third-party contractor costs of 20% of collections) from our current fees is about $140,000 annually. Based our current false alarm volumes and assuming a 90% collection rate for the added fees, we estimate that this will generate additional net revenues of $45,800 annually, summarized as follows: Added False Alarm Revenues Annual Added Cost New Activity Per Alarm Revenue Third False Alarms 273 65.50 17,900 Seventh and Subsequent False Alarms 238 192.20 45,700 Total 63,600 Contractor Fees @ 20%_ (12,700) Net Collections @ 90a $45,800 Of this added revenue, about 92% will come from businesses and only 8% from residences. 1. Consistency with user fee cost recovery policy. This is consistent with the City's policy that those who drive the need for a service — especially one that we want to discourage — should incur the cost. 2. Practices in other cities These vary widely between.cities, but charging for the third false alarm is not uncommon. 3. Customer service impact. We believe that the proposed fees (which still provide for two "no cost" false alarms) is reasonable in the context of the costs we incur in responding to false alarms, which is an activity that we want to discourage. PROPERTY DAMAGE-ONLY COLLISION INVESTIGATIONS California Vehicle Code Section 20008(a) requires that any drivers involved in any traffic collisions that result in injury or death make (or cause to be made) a written report to the law enforcement agency that has jurisdiction over the area where the accident occurred. Even though there are no other specific vehicle code sections that require law enforcement agencies to take a report, this section implicitly makes it clear that law enforcement agencies have a responsibility to prepare a report. However, non-injury traffic accidents are not included under this section, and as such, taking these reports is discretionary. Traditionally, most agencies have investigated non-injury accidents; however, a growing trend has been to stop responding to non-injury accidents for the following reasons: 1. It is not required. 2. Fault determined from the investigation is primarily used for civil purposes. 3. Time spent investigating these accidents negatively impacts officer response times and officer available time on criminal matters. Approximately two-thirds of the annually reported traffic collisions in San Luis Obispo are non- injury. The time spent investigating these accidents results in a significant amount of dedicated -4- ag-9 2005-07 Financial Plan Attachment 2 DESCRIPTIONOF officer time. In 90% of these cases, the benefiting parties are the insurance companies, which rely heavily on law enforcement's determination of cause. These conclusions eliminate the necessity of the insurance companies having to hire a private Accident Reconstructionist, at considerable cost to them. In order to maintain the same level of response and investigation of non-injury traffic accidents, we recommend cost recovery of officer time to perform the investigation. Our officers typically spend sixty to ninety minutes investigating a non-injury traffic collision and completing their report. At a "full cost" of $101.32 per hour, this means costs of $100 to $150 for the average damage-only collision investigation. In most cases, both insurance companies request the results of the investigation. As such, a fee of$50 per party per noninjury traffic collision investigation will achieve full cost recovery in most cases, assuming this fee will be paid by both auto insurance companies. In 2004, there were about 1,200 non-injury traffic accidents; of these, 2,200 copies of those reports were requested. With the proposed fee of $50 fee per party, this would potentially generate about $110,000 annually. Assuming cost recovery from 75% of these, we conservatively estimate annual revenues from this fee of$82,300. 1. Consistency with user fee cost recovery policy. This is consistent with the City's policy that those who directly benefit from a service should incur the cost. 2. Practices in other cities. While setting a fee for this service is not common practice in California, many cities have stopped taking these types of reports. We believe that this "all or nothing" approach does not best meet user needs, and that the proposed market-based, customer-driven approach makes more sense. 3. Customer service impact. We believe that this modest fee for a discretionary service is reasonable approach in balancing the cost of this service— and its resource impact on higher- priority law enforcement needs — against its impact on users (which in most cases is an insurance company). We believe that in most cases, they would prefer to pay a modest fee than not have the service provided at all — which is an option for the City (and one that many other cities in the State have implemented). And typically, drivers not at-fault (either directly or though their insurance company) will be reimbursed by the at-fault drivers (or their insurance company) for all costs of the collision, including this fee. This makes more sense than having the general-purpose tax payer pick-up this cost for those at-fault in causing the collision. ADDED CHARGE FOR PROGRAM USING SCHOOL DISTRICT FACILITIES The need for this added fee surfaced at the Mid-Year Budget Review in February 2005 as a way of mitigating fee increases by the San Luis Coastal Unified School District for use of their facilities. As we noted at that time, we believe that the District's charges are reasonable when compared with other alternatives. Initiating a $0.25 per person per use charge on all programs using District facilities will generate about $80,800 annually. Of this amount, $32,000 was projected in the Mid-Year Budget Review to help offset increases in District fees. The balance -5 - ,?16-A) t i 2005-07 Financial Plan Attachment 2 DESCRIPTIO.N OF i ($48,800) is recommended to help offset service reductions in other recreation program areas, including day care services, classes and adult, teen and youth sports. 1. Consistency with user fee cost recovery policy. This is consistent with the City's policy that day care services and adult athletics should have relatively high cost recovery (60% to 100%) and that youth sports should have mid-range cost recovery (30% to 60%). 2. Practices in other cities. Other agencies throughout the county providing a similar service for before and after school childcare are currently charging $3.00 per hour and operate on a monthly fee only, which means that participants pay for expected hours of use and do not receive credits or transfers for unused hours. At $2.70 per hour, the City's day care services are currently the lowest hourly rate, and charge only for hours used. Along with a planned cost of living increase of $.05, this $0.25 per hour increase will simply bring the program into alignment with the hourly rate that other agencies charge, while retaining the "pay for use only" fee structure. 3. Customer service impact. We believe that this very modest fee increase will have minimal impacts on our customers. UNIVERSAL TRIATHLON FEE Setting one fee for participation in the annual Triathlon regardless of residency will generate about $3,000 annually. The minimal impact on users and participation will be further mitigated by phasing this approach in over two years. With this approach, fees will move from $48 for residents and $64 for non-residents, to $64 for everyone by 2006-07. AIRPORT LAND USE COMMISSION(ALUC) PLAN REVIEW FEE Most discretionary projects located in the Airport Land Use Plan boundary must be reviewed by Community Development staff for consistency with the Airport Land Use Plan. Some of these projects can be found consistent with limited review while others require the staff to help prepare an Aviation Easement form for recording with the County Clerk. We project that there will be an average of 100 permits per year of this type with an average staff time of one hour. A third, and less frequent project, requires staff to prepare documents for ALUC review and attendance at one of their hearings. These will take an average of four hours. To recover these costs, we recommend a fee of $100 for the simpler permits and $400 for projects that go to the ALUC. This will generate new revenues of$12,400 per year. (First year revenue estimates are prorated to $10,300 to reflect a September 1, 2005 effective date.) -6- o2Q'�' 2005-07 Financial Plan Attachment 2 DESCRIPTION OF - FEE SCHEDULEAMENDMENTS Estimated ALUC Review Fees Annual Cost Per New Activity Application Revenue Administrative Reviews 100 100.00 10,000 Reviews Requiring ALUC Hearing 6 400.00 2,400 Total $12 400 1. Consistency with user fee cost recovery policy. This is consistent with the City's policy that development review services should generally fully recover their costs. 2. Practices in other cities. This type of review is not applicable in most agencies. 3. Customer service impact. We believe that this modest fee will have minimal fiscal impacts on applicants while ensuring timely turn-around and review of their applications. In addition, City staff frequently assists the applicant in getting through the ALUC process, yet there is no cost recovery for this service. WATERWAY MANAGEMENT FEE: NPDES COST RECOVERY When we first introduce the new storm water management requirements of Phase II of the National Pollution Discharge Elimination System (NPDES) to the Council in 2002, we noted that there would be added costs in implementing the expanded construction management standards (primarily run-off control from private development). We noted at that time that the best way of recovering these costs would be through the building permits process, since the responsibility for enforcement largely lies with our building inspectors. Based on our experience so far, approximately 65% of permits issued we issue are subject to these requirements. Setting a fee of 7% of the plan check and building permit fee for projects subject to the Waterway Management Plan and the storm water management program will generate additional revenue of $60,000, recovering the 50% of a building inspector position (including indirect costs) required to enforce these regulations. (First year revenue estimates are prorated to $50,000 to reflect a September 1, 2005 effective date.) 1. Consistency with user fee cost recovery policy. This is consistent with the City's policy that development review services should generally fully recover their costs; and it is consistent with prior recommendations that we set a fee tied to the building permit process to recover these costs. Now that we have experience with these regulations, we are able to assess the impacts and recommend a fee strategy. 2. Practices in other cities. Most.cities set building permit fees at a level that recovers costs, although virtually all have different rate structures for doing so. 3. Customer service impact. We believe that this modest fee will have minimal fiscal impacts on applicants while ensuring timely turn-around in inspecting their projects. -7- a�-IZ 2005-07 Financial Plan Attachment 2 DESCRIPTION OF - FEE SCHEDULE AMENDMENTS REPLACEMENT BUSINESS TAX RECEIPT FEE Our current business tax ordinance calls for setting a fee for replacing lost or misplaced business tax receipts by resolution; however, we have never done so. On the other hand, it costs us $31 in staff time, materials and computer resources to process these requests. Given the City's fiscal situation, we recommend setting a fee of $31 for this service. Based on 125 requests for this annually, this will generate $3,900 per year. 1. Consistency with user fee cost recovery policy. This is consistent with the City's policy that those who directly benefit from a service — or drive the need for it — should incur the cost. 2. Practices in other cities. Most cities charge a fee for similar replacements based on the cost of doing so. 3. Customer service impact. We believe that this modest fee will have a minimal impact on the business community: of 7,000 business tax receipts issued annually, only about 2% need this service. This fee will also have a minimal impact on voluntary compliance with the requirement to possess a valid receipt (the underlying reason that we not previously set a fee for this service), since virtually all requests are due to the business's external requirement to show proof of payment (such as a loan application). BUSINESS CHANGE OF LOCATION FEE Our current business tax ordinance also calls for setting a fee for processing a change of business location; however, we have never done so. On the other hand, it costs us $103 in staff time, materials and computer resources to process these requests: $31 for Finance staff to process the change; and $72 for Community Development to review the change in location for consistency with zoning and building requirements. Based on 100 location changes processed annually, this will generate $10,300 annually. 1. Consistency with user fee cost recovery policy. This is consistent with the City's policy that those who directly benefit from a service — or drive the need for it — should incur the cost. 2. Practices in other cities. Most cities charge a fee for similar location changes based on the cost of doing so. 3. Customer service impact. We believe that this modest fee will have a minimal impact on the business community: of 7,000 business tax receipts issued annually, only about 1% need this service. This fee will also have a minimal.impact on voluntary compliance to have with the requirement to possess an up-to-date receipt with accurate location information (the underlying reason that we not previously set a fee for this service), since virtually all requests are due to the business's external requirement to show proof of payment (such as a loan application). -8- a�_� -� 2005-07 Financial Plan Attachment 2 SCHEDULEDESCRIPTION OF MASTER FEE BUSINESS LICENSE PROGRAM Except in very limited circumstances (such as taxi and massage therapist permits), the City does not issue business licenses. Our business tax ordinance exists solely to raise revenues for general municipal purposes, and does not regulate businesses in any way. Accordingly, the business tax receipt that we issue (not license) is simply evidence that the business tax has been paid: it is not assurance that the business is in compliance with any City regulatory requirements (or those of any other agency). However, as noted above, there are regulatory aspects in how we process business tax applications and renewals. For example, in addition to reviewing changes in location, Community Development also reviews all new business tax receipt applications for compliance with zoning and building regulations. In short, there is already a significant regulatory component of the City's business tax program, but we are not recovering these costs. Similar to processing location changes, it costs the City $108 to process new applications for businesses located within the City: $36 for Finance staff to process the application; and $72 for Community Development staff to review the application for consistency with zoning and building requirements. (Businesses with offices principally located outside of the City are not reviewed by Community Development, and as such, only the Finance cost component at $36 is applicable). Annual renewals, assuming no change in location, cost$31 per business. It should be noted that the City's current minimum tax is $25, and has not changed since 1958. While the concept of a business license fee is different than a minimum tax, setting a business license fee of$31 per year in conjunction with the.minimum tax (for total minimum amount due annually for both of$56) recognizes the significant passage of time (almost 50 years) since the City last adjusted the minimum. And for new businesses, the impact of the new $108 is largely offset by the fact that the first year, all new businesses only pay $25, regardless of their likely gross receipts. Based on the proposed rate structure, implementing a business license fee program will generate $254,800 on an annual basis. However, revenues in 2005-06 will be less than this ($37,800 for new applications only), since it will not be possible to enact a business license ordinance (and subsequently set fees by resolution) before the annual renewal process (which begins July 1, 2005). Estimated Business License Fee Revenues Annual Proposed New Activity Fee Revenue New Applications Located in the City 150 $108.00 $16,200 Located outside of the City 600 36.00 21,600 Annual Renewals Effective in 2006-07) 7,000 31.00 217,000 Total $2549800 -9- aB�y 2005-07 Financial Plan Attachment-2 DESCRipm-N OF - 1. Consistency with user fee cost recovery policy. Implementing a business license fee will help recover the administrative and regulatory costs we are already incurring. In short, it will not create any new requirements, but simply recognize the efforts and related resources already in place. 2. Practices in other cities. Most cities issue business licenses and set minimum fees as needed to recover their cost of issuance. 3. Customer service impact. We believe that this modest fee will have a minimal impact on the business community. As noted above, the current minimum cost of a business license/business tax receipt has remained unchanged at $25 since 1958. For renewing businesses, the proposed combined license/tax minimum will be $108. By comparison, simply adjusting the minimum tax for changes in the consumer price index since 1958 would result in a minimum of$168. (Note: Since this would be a business license, it will not be subject to the Downtown Association surcharge based on the business tax.) tea-d-