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Home My WebLink About01/09/1989, 2 - USER FEE ANALYSIS WItETING AGENDA DATE JAN. 1-1 EM MEMORANDUM December 27, 1988 TO: City Council FROM: William C. Statler, Director of Financ a; SUBJECT: USER FEE ANALYSIS OVERVIEW In conjunction with the Financial Services Study approved by the City Council on February 23, 1988, the User Fee Analysis component (Phase I) has been completed. Executive Summaries of the resulting Cost Allocation Plan and User Fee Analysis arc attached for your review and information. City Council review and discussion of these two reports has been scheduled for the January 9, 1988 Study Session. As reflected in the attached summary as well as the overview sections of each of the reports, a potential increase of approximately $2 million in user charges from non-enterprise operations has been identified from present and new fee areas. Additionally, the cost allocation plan component of this study has identified $576,000 in additional general government reimbursements from the City's enterprise funds, of which $149,300 has already been incorporated into the 1988-89 Budget. POLICY ISSUES Beginning with the January 9, 1988 Study Session, it is anticipated that the results of the Financial Services Study will be incorporated into the 1989-91 Financial Plan preparation process. Cost recovery goals are an integral component of the City's financial policies, which guide and direct the development of the City's financial plan and budget. Although the attached reports identify the maximum revenue potential available from each of the City's non-enterprise operating activities, the major policy issue associated with this component of the Financial Services Study is not addressed in this document: • What level of cost recovery that should be achieved through user charges? Cost recovery policies have been formally established for the enterprise funds and recreation programs; however, no specific cost recovery goals have been developed for other program areas such as planning, engineering, or building and safety. It is anticipated that the review and discussion of cost recovery policies will be the primary focus of the January 9, 1988 Study Session. In preparation for that meeting, staff is .currently developing cost recovery recommendations by category of service for City Council consideration during this scheduled study session. METHODOLOGY As described in each of the report documents, the user fee analysis is based on the "total cost" of providing services, which is comprised of three major components: RECEIVED DEC 2 8 ft l crrYCLERKJ�— / SAW LuIsoeSPo.Cn • Allocation of City-wide support costs such as finance, pert.„,inel, and city clerk. • Program administration costs, which arc generally included in departmental budgets. • Direct costs specifically identified with providing a particular service or activity. In developing the service costs reflected in the attached summary, the following supporting documents have been prepared and are available for City Council review in the City Clerk's Office: Allocation of City-Wide Support Costs • General Government Allocation Summary User Fee Work Papers • Public Safety • Leisure, Cultural, and Social Services • Community Development REPORT ORGANIZATION The Executive Summary of the Cost Allocation Plan provides an overview of the Gcncral Government Allocation Summary noted above, and includes a brief discussion of the purpose and uses of the City's Cost Allocation Plan. Summaries of the bases of allocation used, indirect cost allocations, enterprise fund reimbursements, and user fee revenue potentials are also included in this document. The Executive Summary of the User Fee Analysis (Phase I of the Financial Services Study) has been organized as follows: Executive Overview - This section addresses the cost allocation and user fce methodology, and provides summarized results. Throughout the report, fcc areas have been classified as present or new fee areas, and service costs arc organized by function: Public Safety; Community Development; and Leisure, Cultural, and Social Services. Service Costs and Revenues by Function - A separate chapter is provided for each functional service cost area. Within each chapter, a mission statement is provided, followed by a cost/revenue analysis for present and potential fee areas. A detailed description, cost, and revenue analysis is then provided for each fee category. SUMMARY The attached Executive Summary of Phase I of the Financial Services Study (User Fcc Analysis) along with the Executive Summary of the Cost Allocation Plan arc being distributed for City Council review in preparation for the Study Session scheduled for January 9, 1988. if you have any questions concerning the attached reports, or require additional information, please do not hesitate to contact me. MEMO/USRFEANA SUPPORTING DOCUMENTS (available in Council Office) : Cost Allocation Plan ; Public Safety , Community Development , and Leisure and Cultural Services User Fee Work Papers CITY OF SAN LUIS OBISPO •COST ALLOCATION PLAN G SUMMARY OF USER FEE REVENUE POTENTIALS :zzzszssaass:eeaeaasss::eaaauesssessssaa:u:sass::a:ase:assasHsaassss::a:aaazaa:aa:a:e:assaaaaavazaaazezzaa Maximum Potential Service Present Increase Cast Revenue Variance (See Note) ---------------------------------------------------------------------------------------- CURRENT FEE AREAS: Public Safety 5292,960 $120,127 5172,833 $96,988 CommunityDevelopment 1,277,924 530,320 747,604 747,604 Leisure, Cultural, 6 Social Services 1,136,132 473,630 662,502 514,469 -------------------------------------------------------------------------------- Subtotal 2,707,016 1,124,077 1,582,939 1,359,061 ------------------------------'------------------------------------------------- NEW FEE AREAS: Public Safety 867,959 0 867,959 466,123 CCommunity Development 276,620 0 276,620 117,047 Leisure, Cultural, 8 Social Services 203,342 0 203,342 145,729 Subtotal 1,347,921 0 1,347,921 728,899 -------------------------------------------------------------------------------- TOTAL 54,054,937 51,124,077 52,930,860 52,087,960 NOTE: Due to various legal, administrative, and policy considerations, it is not possible to set rates which will recover the entire difference between current service costs and revenues. Based on. these considerations, this column provides an estimate of the maximum revenues available. I�