2010 User Fee Study RESULTS ORIENTATION 2010 User Fee Study RESULTS ORIENTATION Presentation to the...
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Transcript of 2010 User Fee Study RESULTS ORIENTATION 2010 User Fee Study RESULTS ORIENTATION Presentation to the...
2010 User Fee StudyRESULTS ORIENTATION2010 User Fee Study
RESULTS ORIENTATION
Presentation to the Missoula City Council by:
Chad Wohlford, MPPA
September 29, 2010
WOHLFORD CONSULTING
© Wohlford Consulting - 2010 2
TODAY’S GOALSTODAY’S GOALS• Basic Project Orientation• Understand Study Background,
Concepts, and Methodologies• Build Confidence in the Process
and its Results• Discuss Fee-Setting Issues• Introduce and Explain the Final
Study Results• Answer Questions
© Wohlford Consulting - 2010 3
Wohlford ConsultingWohlford Consulting
• Project Consultant: Chad Wohlford, MPPA• Practice owner & Missoula’s on-site consultant• 13+ years of cost and management consulting• 12+ years as a government analyst/manager• Former State Director (CA/NV) for a large national
consulting corporation• Designated “expert witness” / published reference
• Past Clients:
• 70+ cities, counties, states, and districts, including Missoula in 2003/2004
• 30+ program areas studied
Wohlford Consulting 4
Key Project ComponentsKey Project Components
• COST ALLOCATION PLAN:
(Completed in 2009)
Determine the fair distribution of City administration (overhead) costs to the operating departments
• USER FEE STUDY:
Determine the full cost of providing individual services to City customers
2 Different, but Related, Studies:
Wohlford Consulting 5
USER FEE STUDYAPPROACH &
METHODOLOGY
USER FEE STUDYAPPROACH &
METHODOLOGY
© Wohlford Consulting - 2010 6
USER FEE STUDY Project Objectives(More Than Just Numbers)
USER FEE STUDY Project Objectives(More Than Just Numbers)
Establish Objective and Transparent Fee Information
Understand the Full Cost of Services (Direct and Indirect)
Develop Insight and a Rational Basis for Setting Fees
Understand Subsidies and Revenue Impacts Understand User Fees Principles and
Context Enhance Fairness and Equity Ensure Compliance with State Law Simplify Fee Schedules
© Wohlford Consulting - 2010 7
Project Study AreasDetermine the Full Cost of Services
for:
Project Study AreasDetermine the Full Cost of Services
for:
OPG / Planning
Public Works – Engineering
Fire Inspections
Police
Business Licensing
© Wohlford Consulting - 2010 8
Project Focus• A Study of the Cost of Services of
User Fee Activities at Current or Expected Performance Levels
• Not a Management Analysis• Performance or Productivity• Efficiency or Effectiveness • Service Level or Quality • Staffing or Organizational Structure• Comparison of Operations or Services
© Wohlford Consulting - 2010 9
USER FEECONCEPTSUSER FEECONCEPTS
© Wohlford Consulting - 2010 10
User Fee DefinitionUser Fee:
A fee or rate charged to an individual or group that receives a
private benefit from services provided by the City.
Not a Tax: • The service is usually a discretionary
activity requested by the fee payer.
Not Intended to Address Impacts: • Impact Fees for Infrastructure• In Lieu Fees or Assessments
© Wohlford Consulting - 2010 11
Fees vs. TaxesFees vs. Taxes
Source of Service Funding
User Fees
User Fees
User Fees
Taxes (GF)
Taxes (GF)
Taxes (GF)
0%
100%
100%PrivateBenefit
(1)
SomePublicBenefit
(2)
SomePrivateBenefit
(3)
100%PublicBenefit
(4)
(1) Building Permits; Some Rec. Programs
(2) Youth Programs
(3) Comp. / Adv. Planning
(4) Police Patrol
Examples:
© Wohlford Consulting - 2010 12
Common Fee ConceptsUser Fees Should Be:
• Based on the Cost of Services: Not arbitrary Not unintentionally subsidized or profitable Not unfairly subsidized “Estimated reasonable” cost standard
• Fair and Equitable• Consistent with City Goals / Objectives• Compliant with State Law• Dynamic (to address updates & anomalies)
© Wohlford Consulting - 2010 13
FEE STUDYMETHODOLOGY
FEE STUDYMETHODOLOGY
© Wohlford Consulting - 2010 14
Cost-Based Methodology Overview
• Business-Case Cost Analysis:• Rational / Linear Process (Unit Cost Build-up)• Fees Relate to Staff Effort• Fees Vary Based Upon Size and Complexity• Not Based on “Tax” Concepts• Not Revenue Goal Oriented
• Calculation Factors:• Staff Time to Complete Activities and Services• Direct Cost of Individual Staff Positions• Rational Distribution of Overhead and Support• Billable (Cost-Recovery) Hourly Rates
• Full Cost = Potential Fee (starting point)
© Wohlford Consulting - 2010 15
Simplified Conceptual ApproachSimplified Conceptual ApproachService ("Fee“) / Activity
Time to Complete 1 Activity (hours)
XProductive
Hourly Rate
=
Full Cost or
Potential Unit Fee
X
Annual Volume
of Activity
=
Annual Cost or
Potential Revenue
FEE #1: 10
Intake 0.5 $ 50 $ 25 10 $ 250
Plan Check 1.5 $ 100 $ 150 10 $ 1,500
Inspection 2 $ 100 $ 200 10 $ 2,000
Filing 0.5 $ 50 $ 25 10 $ 250
S&B Total: 4.5 hrs. $89 (avg.) $ 400 10 $ 4,000
Other Cost $ 100 10 $ 1,000
TOTAL COST $ 500 10 $ 5,000
Current Fee $ 300 10 $ 3,000
SUBSIDY $200 10 $2,000
© Wohlford Consulting - 2010 16
$ Supervision and Support$ Capital, Growth, & Other Costs
“Full Cost” Includes:
$ Direct Salaries & Benefits$ Services and Supplies
$ Department Administration$ Indirect Activities
$ Cross-Department Support $ Citywide Administration (CAP)
© Wohlford Consulting - 2010 17
Quality Control Processes
• Guidance to City Staff• Applied Experience
(normal range – data/results)
• Involvement of Knowledgeable City Staff• Reasonableness Tests• Balance and Cross-Check• Challenge and Questioning• Historical Review• Internal City Review• Consultant Review
© Wohlford Consulting - 2010 18
FEE SETTINGCONCEPTS
FEE SETTINGCONCEPTS
© Wohlford Consulting - 2010 19
User Fee DefinitionUser Fee:
A fee or rate charged to an individual or group that receives a
private benefit from services provided by the City.
Not a Tax: • The service is usually a discretionary
activity requested by the fee payer. • If a User Fee does not cover the City’s
cost for the service, taxes (General Fund) pay for the remainder.
© Wohlford Consulting - 2010 20
Fee Setting (Pricing) Considerations
• Fairness and Equity• Consistency with City Public Policy
• Cost Recovery• Subsidization• Social Impacts / Affordability• Revenue Impacts• Activity Incentives / Disincentives
• Impact on Demand (elasticity)• Legal Compliance• Other Factors
• Comparable Fees• Constituencies Affected
© Wohlford Consulting - 2010 21
Fees vs. TaxesFees vs. Taxes
Source of Service Funding
User Fees
User Fees
User Fees
Taxes (GF)
Taxes (GF)
Taxes (GF)
0%
100%
100%PrivateBenefit
(1)
SomePublicBenefit
(2)
SomePrivateBenefit
(3)
100%PublicBenefit
(4)
(1) Building Permits; Some Rec. Programs
(2) Youth Programs
(3) Historic Preservation
(4) Police Patrol
Examples:
© Wohlford Consulting - 2010 22
FINDINGSand
RESULTS
FINDINGSand
RESULTS
© Wohlford Consulting - 2010 23
The Meaning of “Results”• Study “Results” will show the FULL COST
of Services – Fee and Non-fee• Results will not be the Fees: City Council
will set the Fees• “Recommended” fees will come later• Some Fee recommendations will likely not
be at 100% of Full Cost• “Subsidy” is the gap between the Fee and
the Full Cost• Subsidies are normally covered by
General Fund Revenues (i.e., taxes)
© Wohlford Consulting - 2010 24
$ Supervision and Support$ Capital, Growth, & Other Costs
“Full Cost” Includes:
$ Direct Salaries & Benefits$ Services and Supplies
$ Department Administration$ Indirect Activities
$ Inter-Department Support $ Citywide Administration (CAP)
© Wohlford Consulting - 2010 25
Sample UNIT COST Results – OPG/Planning
(How to Read the Results Worksheets)
Sample UNIT COST Results – OPG/Planning
(How to Read the Results Worksheets)
• Sample fees shown in order to demonstrate the results format for all fee areas (as will be included in the consultant’s report)
Fee Title
Current Fee /
DepositFull Cost per Unit
Surplus / (Subsidy) per Unit
Full Cost Recovery
Rate
Wall Sign Permit $ 52 $ 113 ($ 61) 46 %
Zoning Compliance Permit – Residential $ 78 $ 206 ($ 128) 38 %
Board of Adjustment Variance – Residential $ 428 $ 2,023 ($ 1,595) 25 %
Comp Plan Amendment - Commercial $ 6,951 $ 7,067 ($ 116) 98 %
Subdivision – Minor – 5 lots $ 6,760 $ 9,608 ($ 2,848) 70 %
Subdivision – Minor – Final Plat Review $ 324 $ 1,423 ($ 1,099) 23 %
© Wohlford Consulting - 2010 26
The Nature of Revenue Results• Revenue and Unit Fee Comparison:
• Current Fee vs. Full Cost• Former Structure (department fees) vs. New Structure (city fees)
• Revenue results provide a common basis for comparison, not budget numbers
• Based on consistent assumptions and/or projections of annual activity levels for each fee
• Revenue estimates in the study may not match budgeted or actual revenues collected
• Actual future revenue levels will change:• Fee-setting by the City Council• Activity levels (market conditions)• Change in the “mix” of services and fees• Timing of the implementation of the fees and revenue collection
© Wohlford Consulting - 2010 27
General Findings• All Departments have a significant overall current fee
subsidy• Billable hours (one measure of productivity) are consistent
with other studies.• Some fees have a surplus, but greater numbers and
volumes of subsidized fees result in overall subsidies.• 88% of current fees in the study are subsidized• All Staff Hourly Rates are less than full cost – averaging
significantly under 50% cost-recovery.• Current hourly rates are significantly lower than those from
other cities’ studies.
© Wohlford Consulting - 2010 28
OPG / Planning Full Cost ResultsOPG / Planning Full Cost Results
• 93% of current fees under-recover full cost• Staff rates are only 38% (avg.) of full cost
• Affects deposit-based fees
• Deposit-based fee revenues = deposit• Combined City-County results
FULL COST:Annual Cost of
Fee-Related Services
CURRENT REVENUE:
Projected @ Annual
Current Fees
CURRENT SURPLUS / (SUBSIDY):
Annual Difference
COST RECOVERY
RATE: Current / Full
Cost
$ 1,181,000 $ 634,000 ($ 547,000) 54%
© Wohlford Consulting - 2010 29
Engineering Full Cost ResultsEngineering Full Cost Results
• 57% of current fees under-recover full cost• Volumes in subsidized fees are enough to
create an annual subsidy of $79,000• All staff rates are significantly less than full
cost
FULL COST:Annual Cost of
Fee-Related Services
CURRENT REVENUE:
Projected @ Annual
Current Fees
CURRENT SURPLUS / (SUBSIDY):
Annual Difference
COST RECOVERY
RATE: Current / Full
Cost
$ 1,263,000 $ 1,184,000 ($ 79,000) 94%
© Wohlford Consulting - 2010 30
Fire Full Cost ResultsFire Full Cost Results
• 100% of current fees under-recover full cost (no fees currently charged)
• All staff rates are significantly less than full cost
• Results include common or traditional subsidized or no-cost services, such as periodic life and safety inspections.
FULL COST:Annual Cost of
Fee-Related Services
CURRENT REVENUE:
Projected @ Annual
Current Fees
CURRENT SURPLUS / (SUBSIDY):
Annual Difference
COST RECOVERY
RATE: Current / Full
Cost
$ 536,000 $ 0 ($ 536,000) 0%
© Wohlford Consulting - 2010 31
Police Full Cost ResultsPolice Full Cost Results
• 76% of Police fees under-recover full cost• Staff rates are only 26% (avg.) of full cost• Results include approximately $1.1M of
Accident Investigation and Report costs ($687 cost vs. $5 current fee)
FULL COST:Annual Cost of
Fee-Related Services
CURRENT REVENUE:
Projected @ Annual
Current Fees
CURRENT SURPLUS / (SUBSIDY):
Annual Difference
COST RECOVERY RATE:
Current / Full Cost
$ 1,451,000 $ 126,000 ($ 1,325,000) 9%
© Wohlford Consulting - 2010 32
Business Licensing Full Cost ResultsBusiness Licensing Full Cost Results
• 54% of current fees under-recover full cost• Volumes in subsidized fees are enough to
create an annual subsidy of $534,000
FULL COST:Annual Cost of
Fee-Related Services
CURRENT REVENUE:
Projected @ Annual
Current Fees
CURRENT SURPLUS / (SUBSIDY):
Annual Difference
COST RECOVERY
RATE: Current / Full
Cost
$ 1,306,000 $ 772,000 ($ 534,000) 59%
© Wohlford Consulting - 2010 33
Citywide Annual Full Cost ResultsCitywide Annual Full Cost Results
Department / Division
FULL COST:Annual Cost
of Fee-Related
Services
CURRENT REVENUE:Projected
(annual) @ Current Fees
SURPLUS / (SUBSIDY)
(Current Revenue – Full
Cost)
CURRENT COST
RECOVERY RATE
(Current / Full Cost)
OPG/Planning $ 1,181,000 $ 634,000 ($ 547,000) 54%
Engineering $ 1,263,000 $ 1,184,000 ($ 79,000) 94%
Fire $ 536,000 $ 0 ($ 536,000) 0%
Police $ 1,451,000 $ 126,000($
1,325,000) 9%
Business Lic. $ 1,306,000 $ 772,000 ($ 534,000) 59%
TOTALS: $ 5,737,000 $ 2,716,000($
3,021,000) 47%
© Wohlford Consulting - 2010 34
CITYWIDERESULTS SUMMARY
• Current overall annual subsidy of $3.0 million
• Overall Cost Recovery Rate for Fee Services Only is 47%
• The subsidy includes $1.1 million for Accident Investigation and Reports, which is unlikely to be collected
• Potential revenue increase (to Full Cost) of $1.9 million
• Without a fee increase or reductions in operating costs, common taxes (General Fund) or other funds will continue to provide subsidies to fee payers
© Wohlford Consulting - 2010 35
Next Steps• City Staff will consider general fee-setting and cost
recovery goals and solicit direction from the Council.
• City Staff will distribute Consultant's final report and detailed lists of cost results and findings.
• City Staff will work to develop “Recommended” fees for the Council’s consideration (based on Council goals).
• City Council will set the final fee levels and establish the implementation date.
• Departments will update fee schedules and reprogram electronic permit systems.
• New fees will go into effect on the designated date.
• Council may set an overall cost-recovery policy to guide future staff action.
© Wohlford Consulting - 2010 36
“Typical” Recommendations(From Other Consultant
Studies)• Staff Rates @ 100% Cost-Recovery ($0 subsidy)
• Most Fees @ 100% Cost-Recovery ($0 subsidy)
• Sample Exceptions:• Public Safety Fees (causing excessive non-compliance)• Appeal Fees• Fees Charged to Partner Community Groups• Fees Limited by the State or Other External Entities• Fees Charged to Disadvantaged Groups
• Phased Approaches
© Wohlford Consulting - 2010 37
QUESTIONS?
Chad Wohlford, Project [email protected]
For further information, please contact: