HomeMy WebLinkAbout05/19/2009, B4 - STRATEGIC BUDGET DIRECTION: REVENUE FOLLOW-UP council MatnD� 5-19-09
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CITY OF SAN LUIS OBISPO
FROM: Bill Statler,Director of Finance & Information Technology
SUBJECT: STRATEGIC BUDGET DIRECTION: REVENUE FOLLOW-UP
RECOMMENDATION
Conceptually approve the following revenue actions for 2009-11 in follow-up to Council
direction for added information at the April 21, 2009 meeting:
1. Implement a monthly rate program for child care services that would retain the current hourly
rate as its basis.
2. Implement the use of administrative citations for open container violations as initially
proposed.
3. Defer consideration of"trash roll-off' fees pending exploration of an annual permit fee with
waste hauling companies.
4. Establish a new $100 minimum base encroachment permit fee for application of voluntary
work or other public beneficial work in the right of way that does not require significant staff
review (such as traffic control, inspection or design).
5. Implement the significant fee reduction reflected in the Cost of Services Study for sewer
lateral replacement encroachment permits..
REPORT-IN-BRIEF
This report responds to the Council's direction for added information at the April 21, 2009
meeting. Detailed responses follow on each of the topics, summarized as follows:
1. Child Care Fees. We recommend retaining the proposed $4.00 per hour rate for "drop-ins"
but providing a discounted monthly rate based on the current rate of$3.30 per hour. Added
revenues with this approach would be $38,500 compared with the initial recommendation of
$55,000, a reduction of$16,500.
2. Open Container Violations. As discussed below, this revised approach results in about the
same cost to violators as the current fine approach; however, due to court costs, the City
would receive a higher portion under the citation approach, resulting in added net revenues of
$29,000 annually. Additionally, as detailed below, we believe that the proposed citation for
open container violations is in alignment with other offenses.
Strategic Budget Direction: Revenue Follow-Up Page 2
3. Engineering Permits: Trash Roll-Off Fees. In further reviewing the goal of this fee —
better regulation of the City's right-of-way for offsite trash containers in residential areas
where this causes neighborhood concerns — we believe that an annual permit fee with the
waste hauler companies may be the best approach. Accordingly, we recommend deferring
consideration of this fee until we have had the opportunity to explore this option further. We
plan to return to the Council by December 2009 with recommendations on this matter. With
annual revenues projected at $3,375, there are no significant fiscal consequences with this
deferral.
4. Minor Encroachment Permits. In addressing concerns with minor encroachments, we
recommend establishing a new $100 minimum base encroachment permit fee for application
of voluntary work or other public beneficial work in the right of way that does not require
significant staff review (such as traffic control, inspection or design).
5. Sewer Lateral Replacements. We recommend implementing the significantly reduced fee
for sewer lateral replacements as recommended in the Cost of Services Study. However, we
do not believe that an even lower fee is warranted in this case: the proposed reduced fee
reflects reasonable cost recovery; and since the Sewer Fund covers this cost in the lateral
replacement program, a lower fee would result in a General Fund subsidy of the Sewer Fund.
DISCUSSION
Background
On April 14, 2009, the Council considered the budget balancing strategy in closing an estimated
$10.4 million annual budget gap in 2009-11. The Council conceptually approved all of the
components of the recommended strategy at that time. However, the Council requested
additional information on several of the added revenue recommendations, which was presented
to the Council at its April 21, 2009 meeting. At that time, the Council finalized action on all of
the outstanding items, with four exceptions:
1. Child Care Fees. The Council requested structure options for lower overall cost recovery
than initially proposed, including the possibility of a discounted rate for those who use this
service on an ongoing basis versus "drop-ins."
2. Open Container Violations. The Council requested additional analysis and options that
consider the seriousness of open container violations compared with other offenses.
3. Engineering Permits: Trash Roll-Off Fees. The Council requested additional analysis and
options for this fee.
4. Encroachment Permits. The Council requested additional analysis and options for lower
fees for small-scale curb/gutter/sidewalk and trenching (like residential sewer laterals)
encroachment permits.
Strategic Budget Direction: Revenue Follow-Up Page 3
The following summarizes the revised revenue proposals in response to Council direction on
April 21, 2009 for additional information:
Child Care Fees
Current fees for this program are $3.30 per hour. The initial recommendation was to raise fees to
$4.00 per hour, which would result in rates that were still very competitive compared with other
providers. (Detail on the proposed revisions is provided on page 134-33 of the April 14 report.)
This was estimated to generate $55,000 in added revenues annually (from $397,500 to
$452,500).
The proposed revision would retain the proposed $4.00 per hour rate for "drop-ins" but would
offer a discounted monthly rate based on the current rate of$3.30 per hour as follows:
Proposed Monthly Rate
Time Block
7:00 AM to 8:30 AM (Before School) $100
2:30 PM to 6:00 PM (After School) $235
Extended After School for Kindergartners
Noon to 2:30 PM $132
With this fee schedule, customers would have the option of purchasing monthly service for a
"menu" of time blocks that best meet their needs. If all days in the month are used, these
monthly rates reflect a net hourly rate that is slightly less than the current hourly rate of$3.30 per
hour.
Staff estimates that up to 30% of customers might choose this option. Based on this, added
revenues with this approach would be $38,500 compared with the initial recommendation of
$55,000.
Other Options
1. Increase all rates to $3.65 per hour (mid-point between the current $3.30 per hour and
proposed $4.00 per hour rate) and do not implement monthly rates. This would generate
about $27,500 in added revenues annually(50% of the initial proposal of$55,000).
2. Increase drop-in rates to $3.65 per hour and implement monthly rates as presented
above. This would generate about $20,000 in added revenues annually compared with the
initial recommendation of$55,000.
Given the competitive nature of the proposed "drop-in" rate at $4.00 per hour and the added
monthly rate structure that retains the current hourly rate of$3.30, we do not recommend these
options.
Strategic Budget Direction: Revenue Follow-Up Page 4
Open Container Violations
The Council directed staff to further consider whether the proposal to issue administrative
citations for first offense violations of the City's open container of alcohol in public ordinance
(SLO Municipal Code 9.04.010) was aligned with the seriousness with which we treat similar
offenses, including urinating in public and noise violations. (Detail on the proposed revision is
provided on page B4-52 of the April 14 report.). The following clarifies the nature of what is
being proposed (more of a revenue shift rather than a fine increase) and compares what is being
proposed to other similar violations to make sure they are aligned as to enforcement and penalty.
Revenue "Shift"
Currently; violations of the open container ordinance are a criminal misdemeanor. The base fine
for a first offense violation (within a 12 month period) is $100. However, court fees and costs
increase the fine to $380 upon conviction. Judges have the discretion to lower or waive the fine;
order community service or probation; or sentence violators to county jail for misdemeanor
convictions. For each citation, the City receives approximately $79 back from the court if the
fine is paid and collected. The base fines for subsequent convictions within a 12 month period
increase.
Staff is not proposing to increase the base fines for violations that are referred to criminal court.
Rather, staff is seeking authorization to issue administrative citations for first offense open
container violations instead of issuing criminal citations. Administrative citations do not go to
criminal court and result in a fine only, which is payable entirely to the City. Administrative
citations are appealable to a City hearing officer, who can dismiss the citation if it was issued
improperly. By utilizing administrative citations, all of the revenue collected from the fine goes
back to the City General Fund. The proposed administrative fine of $350 for a first offense
violation is approximately the same as the $380 fine a violator would expect to pay if convicted
in criminal court ($100 base fine plus court fees).
Alignment with Similar Offenses
In 2004, the Council approved a new Safety Enhancement Zone ordinance that tripled fines for
certain Municipal Code violations during the period of Mardi Gras and allowed officers to issue
administrative citations for the violations rather than criminal citations (this was necessary in
order to be able to increase fines for a select period of time). The Municipal Code offenses
included in the Safety Enhancement Ordinance include:
Section 9.04.010 - Possession of an open container in public
Section 9.12.050 (A) -Noise Violation
Section 9.20.050 - Urinate/defecate in public
These offenses are similar in that they are all non-violent, predominately alcohol-related crimes
that relate to the quality of life for neighborhood residents and downtown merchants and visitors.
B 4
Strategic Budget Direction: Revenue Follow-Up Page 5
After staff found that the administrative fine process was working well, the Council approved the
permanent implementation of using administrative citations for violations of the noise ordinance
and urinating in public ordinance, with a fine schedule of$350 for a first offense in a 12-month
period; $700 for a second offense within a 12-month period; and $1,000 for third or subsequent
offenses in a 12-month period. At the time of this approval, staff did not propose year-round use
of administrative citations for open container violations because staff felt that alcohol violations
should generally be kept under the jurisdiction of the criminal court, especially since there were
options for mandated treatment as part of probation for repeat offenders who may have an
alcohol dependency issue.
Staff has again reviewed the appropriateness of utilizing the administrative citation process for
open container citations and now recommends that first offense violations be enforced through
the administrative citations process, with second or subsequent violations (indicated a propensity
for repeat violations and perhaps a substance abuse problem) remaining under the jurisdiction of
the criminal court where options other than a fine may be employed, including treatment.
In order to maintain alignment with the fine structure for urinating in public and noise violations,
staff is proposing that first offense open container violations be subject to the same
administrative fine schedule: $350 for a first offense in a 12-month period; $700 for a second
offense within a 12-month period; and $1,000 for third or subsequent offenses in a 12-month
period.
As an added note, minors (under age 21) who possess or consume alcohol in public would not
fall under this municipal code but instead would be issued a citation for violation of state law
(California Business and Professions Code section 25662), which would be heard in criminal
court as a misdemeanor.
Engineering Permits: Trash Roll-Off Fees
During the Council review of the proposed new revenues, two questions were asked regarding
the proposed "Trash Roll-Off' fee (which is discussed on page 134-45 of the April 14 report):
1. Why are we charging a fee for this use of public-right-of--way(ROW) at all?
2. Isn't the proposed fee high in relation to the actual use?
Although the discussions have focused mainly on trash roll-offs, the permit process used is
applicable to any construction staging in the ROW. We have used the miscellaneous permit
process for several right-of-way encroachments, such as roll-offs, pod storage structures,
pedestrian protection structures, landscape material drops and palletized materials. We always
encourage our residents to use their property for these purposes but in some cases there are
limited private options or significant obstacles. The encroachment permit is usually scrutinized
and is the last resort. Staff continues to recommend implementation of the fee implementation as
proposed for following reasons:
1. We have always had an encroachment fee for individuals that choose to use the public ROW
(in lieu of their own driveway/private property). A viable, no cost option already exists for
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Strategic Budget Direction:. Revenue Follow-Up Page 0
property owners: placing the trash bin on site and not impacting the ROW. This is where we
prefer them: in many neighborhoods, where parking is scarce and sight distance around
curves or driveways is important to maintain; and in some neighborhoods, the residential
parking permit district makes taking up limited curb space problematic from a permitting
standpoint as well as a parking capacity standpoint.
We continue to receive complaints from neighbors about unpermitted waste haulers that have
been placed in the ROW and sometimes need inspection after the fact to make sure the street
is not damaged or the bin placed inappropriately. The cost of these staff inspections are
usually recovered from specific users that cause the issue via fees like those proposed.
2. The proposed fee is actually a reduction in the cost of the base encroachment fee for this
purpose. The current fee is approximately $381. The proposed modified fee is $100, with a
weekly check to encourage use and then removal as quickly as possible. If a contractor has
pulled a permit for curb, gutter or sidewalk work and requests a bin, the permit fee for the bin
placement is considered part of the overall permit fee and not charged again. Residents still
have the option to place these things on their own driveway (property) and obviously no fee
is required under that option.
A final option that staff is considering is to work with the waste hauler companies in the next few
months to determine if an annual permit fee (similar to other franchise fees) would be a better
way to deal with these fees and permits. Under this scenario, the waste companies would
become the agency responsible for meeting permit requirements and fees and charge this fee back
to individuals who need the bins placed in the ROW.
Recommendation. We believe that an annual permit fee with the waste hauler companies may
be the best approach. Accordingly, we recommend deferring consideration of this fee until we
have had the opportunity to explore this option further. We plan to return to the Council by
December 2009 with recommendations on this matter.
Encroachment Permits
During the Council's review of the proposed new revenues, questions were raised regarding
potential reductions in miscellaneous residential curb, gutter and sidewalk encroachment permits.
The Council asked staff to review these fees with an eye toward reducing some minor work-
related encroachment fees to encourage compliance with permitting requirement yet not overly
burden this type of work with a substantial fee.
Staff has attempted to take an objective look at this issue however there is some difficulty in
defining what type of work may justify a minor fee application (or waiver). Certainly, voluntary
work that is proposed in the ROW such as voluntary sidewalk replacement would fall within this
provision. Any fee associated with this type of permit request needs to be tempered such that it
does not become a disincentive to do the actual work and yet should recover a reasonable amount
for City services that are performed.
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Strategic Budget Direction: Revenue Follow-Up Page 7
In contrast, voluntary work that may be in addition to required work (example, extending
sidewalk replacement that is beyond a development project's required frontage improvements)
may fall inside or outside of this parameter depending on the particular situation for each
individual instance. In essence, staff believes it is difficult to define a "one size fits all"
parameter that could be used to address some of these instances. Examples of this type of work
could include: voluntary sidewalk replacement, sewer lateral replacement, tree
removal/replacement or off site connections. Complicating this issue is the Municipal Code
requirement that public infrastructure should be upgraded for major remodels that staff must
balance with actual work to be performed.
Minimum Fee Proposal
Since it is difficult to have a pure definition for each type of work, staff is proposing to create a
new fee category that would create a"minimum fee"permit for this type of work that would exist
at the discretion of the Director of Public Works for application when individual residential
proposed works falls in a category of accomplishing the greater good in a voluntary manner.
Staff considered establishing individual fees for different types of work but believes that may
establish additional thresholds of application that are not the intention of the Council's request.
In balancing the various issues, we recommend establishing a modest $100 flat fee for minor
work of a voluntary nature that could be waived by the Director in circumstances where the
proposed work is minor in cost and leads to infrastructure improvements.
Recommendation: Establish a new $100 minimum base encroachment permit fee for application
of voluntary work or other public beneficial work in the ROW that does not require significant
staff review (such as traffic control, inspection or design).
Voluntary Sewer Lateral Replacement Program
The Voluntary Sewer Lateral Replacement Program (VSLRP) has different issues associated
with this type of work than other voluntary work that may be performed in the ROW. Sewer
lateral replacement often require work within the roadbed or travel lanes that require traffic
control set up and monitoring, as well as trench safety inspections and replacement. Applying a
minor fee to this type of work does not seem appropriate due to the higher level of staff
involvement in overseeing the work and performing duties. Thus, keeping the VSLRP
encroachment fee commensurate with actual costs seems appropriate at this point.
The good news on this front in the fee for this type of work is proposed to go down in the Cost of
Services Study by over 50%:
Current permit fees for this work: $1,188 (base fee) + $2.80 per lineal foot.
Proposed permit fee for this work: $477 (base fee) + $2.00 per lineal foot.
Thus, while the cost of the permit is still moderate, it is actually being reduced and the VSLRP
refund program is still in place that assists residents in offsetting the costs of these fees. Lastly,
the VSLRP encroachment fee is covered by the funding provided by the Sewer Fund. As such, if
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Strategic Budget Direction: Revenue Follow-Up_ _ Page 8
the Council was to reduce this fee below cost recovery, this would be a General Fund subsidy of
the Sewer Fund, which we do not recommend.
Recommendation: Implement the reduced fee for sewer lateral replacement as recommended in
the Cost of Services Study.
Next Steps
If approved by the Council, the revised revenue projections will be reflected in the Preliminary
2009-11 Financial Plan, which will be distributed on May 28, 2009. This will be followed by
four budget workshops and hearings. Formal approval of these revenue actions will occur with
Financial Plan adoption, which is scheduled for June 16, 2009.
CONCURRENCES
The Departments of Police, Public Works and Parks & Recreation concur with the proposed
actions.
FISCAL IMPACT
If adopted by the Council, these revised fee recommendations would have a minor impact on the
budget balancing strategy of $19,875: $16,500 from reduced child care fees and $3,375 from
deferred consideration of trash roll-off fees.
ALTERNATIVES
As discussed above, there are a broad range of options, ranging from not implementing any fee
increases at all to implementing initial recommendations. We believe that the proposed revisions
address the Council's concerns while also ensuring reasonable cost recovery.
AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE AND CITY WEB SITE
1. April 14, 2008 Revenue Recommendations as Part of Strategic Budget Direction
.http://www.slocity.orl;/cityclerk/agendas/2009/041409/b4strategi cbudgetdirection pdf
2. Cost of Services Study(Presented.to Council on February 24, 2009)
http://www.slocity.6rg/cityclerk/agendas/2009/022409/b2costofservicesuserfeestudypdf
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