HomeMy WebLinkAbout119-05 RESOLUTION• •
CITY OF FAYETTEVILLE, ARKANSAS
POLICY STATEMENT
a.Lt
For Adoption as of June )1, 2005
Replaces all previous versions
Effective Date: Effective Upon Adoption by City Council
Subject: User Fee Cost Recovery Policy for City Services
This policy statement establishes the City's cost recovery policy for selected city services
and establishes and sets guidelines for the periodic evaluation of the City's charges for
City services.
General Policy
1. User fees should be considered as part of the City of Fayetteville's entire
revenue system.
2. User fees should not be used for programs or services that generally benefit the
citizenry as a whole or that are a basic service that should be provided through
general revenue or enterprise revenues. Enterprise revenues shall be reviewed
annually to assure compliance with the existing ordinance requirements:
A. City's adopted minimum reserve requirement,
B. Requirement of any bond/debt instrument that relies upon enterprise
fund revenues, or
C. City Council approved capital improvement program to be funded
pay-as-you-go.
3. User fees should be levied fairly and equitably and properly account for the
benefit received by each user.
4. User fees should be accountable to the persons who will be burdened by the
costs of the fee and its administration.
5. The following definitions shall have the meaning ascribed to them as listed
below for the purposes of User fee cost determination:
A. Direct Cost (direct cost) shall be limited to the city
employee/contractor providing the service and 62A% of the cost of all
equipment/facility excluding buildings that are required for the
service delivery and any additional expense incurred to provide the
service.
B. Departmental cost (departmental cost) shall be limited to Direct Cost
plus a pro -rated share of departmental overhead (supervision and
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administration), plus pro -rated cost recovery for building/facilities
(2% of original investment/reinvestment), plus pro -rated cost
recovery for equipment (62/3% of original investment/re-investment)
and shall not include any indirect central service administration cost.
Full cost (full cost) shall include all direct departmental and indirect
central service administration cost including pro -rated cost recovery
for buildings/facilities (2% of original investment/re-investment) and
equipment (62/3% of original investment/re-investment.)
See Attachment 1 for examples depicting cost development for each item listed
above.
6. The Finance & Internal Services Department (FIS) shall maintain a
comprehensive listing of all City of Fayetteville User Fees and Charges to
include, at minimum, fee title, enabling ordinance and last date amended.
7. Current user fees and charges shall be evaluated by the FIS Department on a
three-year cycle except Animal Services which shall be reviewed in 2009 and
then placed on a three-year cycle, as described in the table below, to ensure that
all user fees contain the full cost of providing the service. This does not
prohibit the responsible division from reviewing and modifying user fees more
frequently More frequent division review is encouraged to eliminate excessive
tri -annual adjustment.
Division
Initial Evaluation Year
Airport Fees/Rents
2005
Parks & Recreation
2006
Development/Building Permits
2007
Water & Sewer—Maintenance
2008
Water & Sewer — Meter
2008
Animal Services
2009
8. The user fees adopted by City Council shall be adjusted annually by the
maximum of 1) the All Urban Consumer Price Index published by the Bureau of
Labor Statistics or successor organization on/about July 31 of the previous year,
or, 2) the average merit increase for non -civil service employees of the City for
the preceding twelve (12) months referred to as "formula increase." Additional
adjustment to fees may be adopted by the City Council to recognize actual costs
of service and service level changes.
9. All fee adjustments based on a formula increase become effective the following
January 1.
10. Any adjustments to the existing structure of charges shall be published in the
daily newspaper in advance of the annual budget public hearing notice.
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11. The following general guidelines shall be used in the annual evaluation:
A. Charges for municipal services, where appropriate, should recover 100%
of the full cost of providing any municipal service that is not a general service of
the City except those listed below.
B. Animal adoption fees and low cost spay/neuter fees may recover less than
25% of full cost until 2009 unless City Council amends the cost recovery policy
for these services. The measure for the effectiveness of this cost recovery policy
for these services is the change (increase/decrease) in the people participation in
the program.
C. Charges related to Youth Sports Activities/Leagues and Family Activities
shall recover between 25% and 75% of the departmental cost of providing the
services. Fees for public admission to Wilson Park Pool may recover less than
25% based on recommendations of the Parks & Recreation Advisory Board.
D. Charges related to Adult Sports Activities/Leagues shall recover no less
than 75% of the departmental cost of providing the services.
E. Development charges (annexation, rezoning, lot split, construction plan
review, infrastructure, stormwater, etc.) shall recover 100% of the full cost of
providing the services unless reduced or waived by City Council.
F. Building Permits fees shall recover 100% of the full cost of providing the
service unless reduced or waived by City Council.
G. Fees for the Water/Sewer Maintenance Division to make new or
replacement connections to existing water and/or sewer mains shall recover 75%
of the full cost of providing the services.
H Services performed after normal work schedule, on weekends or holidays,
should recover 100% of the actual full cost of performing the service.
12. The review process will not provide an automatic mechanism for passing along
any inefficiency which may exist in the system. Cost information will be reviewed for
significant fluctuations (greater than 10%) as a part of the evaluation process. Continual
process evaluation by the implementing division heads and department directors is
mandatory. Efficiencies achieved by the continuous review will be utilized to reduce or
contain user fees.
13. In instances where under -recovery of a cost is occurring, an additional maximum
of 10% above formula increases may be phased in until cost recovery percentages reach
100% or the percentage of recovery identified in this policy statement.
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OVERVIEW
City policy and Arkansas municipal law provides that the charge for a municipal service
is to be set at a level which does not exceed the cost of providing the service. The term
"cost" in relationship to municipal services is defined as the allocable cost of direct and
indirect labor, supplies, charges, and capital outlay used to provide each specific service.
Allocations for both departmental and city wide administrative overhead are also
included in the cost determination. Cost recovery levels of 75% to 100% are generally
accepted as desirable for most services.
Service efforts and accomplishments (SEA's) measures used to review the charges for
services include, as appropriate, the following:
Measures of Efforts
• Non-financial resources
o Number of labor hours, by position, expended to deliver services
o Cost of materials and equipment expended to deliver services
• Financial resources
o Fully burdened labor costs, by position, expended to deliver services
o Expenditures used to deliver services, including both direct and indirect
costs
Measures of Accomplishments
• Output measures
o Number of service units produced
• Outcome measures
o Average cost per service unit produced
o Average revenue generated per service unit produced
Measures of Efficiency
• Percentage of cost recovery
• Percentage increase or decrease of average cost per service unit from prior period
• Percentage increase or decrease of cost recovery from prior period
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a'F y'etteyile
DEPARTMENTAL CORRESPONDENCE
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TO: Mayor Dan Coody and City Council
THRU: Stephen Davis, Finance & Internal Services Direct
FROM: Kevin Springer, Budget Manager
DATE• June 3, 2005
SUBJECT: User Fee Policy
Recommendation
Staff recommends that City Council approve a User Fee/Cost Recovery Policy that stipulates
acceptable subsides from governmental revenues for services provided that are eligible for User
Fees. The policy, as amended by the Ordinance Review Committee, is attached for City Council
consideration and adoption.
Summary
Adoption of a policy statement by City Council will govern the timing of the fee area review as well
as provide guidance for any future user fee adjustments.
This project began in mid -2003 when the City entered into a contract with Maximus, Inc. to perform
user fee study and cost allocation studies, and to develop a user fee report, a cost allocation model,
and train City staff on the use of cost allocation and user fee software. These items have been
delivered to the City and the Maximus, Inc. contract is considered to be completed.
The original completion date for work was October 2003 to be available for the 2004 Budget. A
revised schedule was approved that moved the completion date to June 2004. The consultant has
provided staff the following items: cost allocation model, software, and software training. The draft
User Fee policy was prepared and submitted to City Council as part of the September 21, 2004
agenda. City Council tabled the User Fee policy and remitted it to the Ordinance Review Committee
for study and changes. The attached user fee policy is the result of meetings between City Council
Ordinance Review Committee and City Staff. The Ordinance Review Committee met on the
following dates:
January 20, 2005
Initial Staff briefing of the draft User Fee Policy to the Ordinance Review
Committee.
February 3, 2005
User fees being
Animal Services
City Council approval.
discussed were for the Water & Sewer Maintenance and
divisions. The committee approved the recommended fees for
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February 23, 2005
User fees being discussed were for the Parks & Recreation Division. The Parks
& Recreation Division was going to submit recommendations to the Parks &
Recreation Advisory Board for approval.
March 4, 2005
Internal division meeting to determine
to be submitted for City Council approval.
which resolutions and ordinances need
Background
The City has a long history of charging user fees for a number of City services. The initial user fee
study was initiated by the City approving a contract with DMG, Inc. in mid-1991. The study results
were delivered to the City in 1992 and due to the change in the form of government, staff was
instructed not to bring the study forward. Portions of the 1991/1992 User Fee study were updated
and were implemented in 1996. Staff identified funding in 2003 for an updated study, conducted a
professional selection process and submitted a contract with Maximus, Inc. for City Council approve.
Budget Considerations
Adoption of a User Fee/Cost Recovery Policy will provide a mechanism for keeping user fees within
pre -approved general revenue subsidy levels while maintaining the levels of service that are
expected.
• •
RESOLUTION NO.
A RESOLUTION ADOPTING A USER FEE COST RECOVERY
POLICY FOR CITY SERVICES.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
FAYETTEVILLE, ARKANSAS:
Section 1. That the City Council of the City of Fayetteville, Arkansas
hereby adopts a User Fee Cost Recovery Policy for City Services, a copy of
which, marked Exhibit "A" is attached hereto, and made a part hereof.
ATTEST:
By:
PASSED and APPROVED this 215t day of June, 20W1
APPROV D
DAN C:OeODY, Mayor
S(+ NDRA S°� TH z(ity CI
• City of Fayetteville •
Staff Review Form
City Council Agenda Items
Contracts
21 -Jun -05
City Council Meeting Date
Kevin Springer -24 y Budget & Research Finance & Internal Services
Submitted By
Division
Action Required:
Department
City Council is requested to approve a User Fee Cost Recovery Policy that will provide policy guidance concerning the
development of user fees, establishing the maximum general revenue subsidy for specific types of user fees,
determining the frequency of fee review and adjustment and the preferred method for the periodic user fee
adjustments.
N/A
Cost of this request
N/A
Account Number
N/A
Project Number
N/A
Category/Project Budget (2005)
N/A
N/A
Program Category / Project Name
N/A
Funds Used to Date Program / Project Category Name
N/A
N/A
Remaining Balance Fund Name
Budgeted Item Budget Adjustment Attached
1. OC
Departm nt Director ate
C7-9 u 454
aCity Attomey
Mayr
Previous Ordinance or Resolution #
Original Contract Date:
Original Contract Number:
Comments:
Clarice Pearman - Res. 119-05
From: Clarice Pearman
To: Springer, Kevin
Date: 6/24/05 11:25AM
Subject: Res. 119-05
•
Kevin,
Attached is a copy of the resolution passed by City Counci, June 21, 2005 regarding the User Fee Cost
Policy. Please get me a clean copy with the date changed to June 21st.
Thanks.
Clarice
CC: Deaton, Vicki
Page 1
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RESOLUTION NO. 119-05
A RESOLUTION ADOPTING A USER FEE COST RECOVERY
POLICY FOR CITY SERVICES.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
FAYETTEVILLE, ARKANSAS:
Section 1. That the City Council of the City of Fayetteville, Arkansas
hereby adopts a User Fee Cost Recovery Policy for City Services, a copy of
which, marked Exhibit "A" is attached hereto, and made a part hereof.
PASSED and APPROVED this 21st day of June, 2005.
ATTEST:
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c•FAYETTEVILLE:
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By: Ma
S NDRA SMITH, City Clerk
APPROVE
By:
DAN COODY, Mayor