SR-211-003
FI:CMD:mp/cmlll186
Date: November 11, 1986
Santa Monica,
!(-{!,
NQV 11 1986
-l~
.,. /'/
California
// ,,-"" (Al
TO: MAYOR AND CITY COUNCIL
FROM: City Staff
SUBJECT: RECOMMENDATION TO AUTHORIZE THE CITY MANAGER TO
NEGOTIATE AND EXECUTE A CONTRACT WITH DAVID M. GRIFFITH
AND ASSOCIATES TO PERFORM A COMPREHENSIVE REVIEW OF
CITY FEES AND TO APPROPRIATE NECESSARY FUNDS.
Introduction
This report recommends that the City Council authorize the City
Manager to negotiate and execute a contract with David M.
Griffith and Associates to perform a comprehensive review of City
user fees and to appropriate necessary funds.
Background
The city of Santa Monica currently charges various user fees for
the provision of services to specific service recipients. The
intent of these user fees is to recover, to the extent possible,
the city's full costs from the party that receives the service
benefit and to avoid subsidization of these costs from general
tax revenues. Nevertheless, in some cases, user fees have been
set below full costs in order to ensure fee level comparability
with similar neighboring jurisdictions and/or to recognize that
in some cases, it is in the pUblic interest that full costs not
be recovered. In keeping with this intent, from time to time
staff has recommended to Council that specific user fees be
increased. Several factors, however, now indicate that this
piecemeal approach to the setting of user fees is not in the
City's best interests and that a comprehensive review of the
City's user fee structure is necessary.
In particular, staff believes that a comprehensive user fee
review should be conducted in order to: a) inform the Council of
the full costs associated with the provision of recipient
- 1 -
II-(!..
HOV 11 /986
specific services, b) identify for Council consideration existing
cost subsidies, c) indicate how the City's financial systems
should be revised so as to provide the information and capability
to maintain user fee levels commensurate with actual costs and
Council policies concerning the appropriate degree of cost
recovery, d) identify recipient specific services for which new
user fees could be charged, and e) protect the long-term fiscal
health of the City by remaining under our Gann Limit.
Comprehensive User Fee Review
The purpose of a comprehensive user fee review is to determine
the full costs of services provided by the City for which user
fees are or could be charged, and to identify how a City's
financial systems should be revised to provide the capability to
maintain user fees at appropriate levels. A comprehensive user
fee review typically involves the follow major work tasks:
Task #1: In-Depth Interviews of city staff
Various service delivery personnel are interviewed.
From these interviews, measurable units of service are
defined and all work activities associated with
providing these services are identified.
Task #2: Review of City Revenue structure
All City fee and non-fee revenues, and the
relationships of fee revenues to service units are
identified.
Task #3: Identify the Full Costs of Providing Each
unit of Service
All cost elements (direct costs such as labor,
supplies and equipment; employee benefits;
departmental and various Citywide overheads; and
capital replacement) are identified for each service.
- 2 -
Task #4: Analyze the Relationship Between Full
Service Costs and Existing User Revenues
The purpose of this analysis is to determine user fee
and/or cost adjustment options available to the City
in order to better match service provision costs and
associated revenues.
In order to complete such a comprehensive user fee review and to
present the results as part of the FY1987-88 budget process,
staff has determined it is necessary to retain the services of a
consultant with extensive fee analysis expertise and experience.
Consultant Selection Process
To select an appropriate consultant, a selection team was formed
consisting of the City Manager, Assistant City Manager, Director
of Finance and a Senior Management Analyst from the city
Manager's office.
Based on contacts with various other cities which have previously
retained the services of a consultant to perform a comprehensive
user fee review, the selection team determined that there were
only two firms of sufficient professional stature and prior
experience with California cities which were capable of
performing such a review. These two firms are David M. Griffith
and Associates and the Management Services Institute.
Following an extensive appraisal of each firm's performance on
prior comprehensive user fee reviews completed for other
California cities, a detailed review of typical work products,
interviews with the principal project staff of each firm, and an
evaluation of the costs proposed by each firm to complete a
comprehensive review of the City's user fee structure, the
selection committee concluded that David M. Griffith and
Associates could best meet the City's needs.
BUdget/Financial Impact
- 3 -
The total cost of completing a comprehensive user fee review is
$85,300, including a 5% cost contingency. The reason for the 5%
contingency is that as the study progresses, it may be necessary
to pursue user fee-related matters not currently provided for in
the existing scope of work, and/or to cover minor unanticipated
study expenses. Upon completion of the comprehensive fee review
and consideration of the resulting recommendations by the City
Council, other City funds benefiting from the review will be
charged their fair share of actual consultant costs incurred in
performing the review. In this manner, it is estimated that
approximately 40% of actual consultant costs will be shared by
funds other than the General Fund.
To proceed with the comprehensive fee review, it is necessary to
appropriate $85,300 at account number 01-110-205-000-506 from the
unobligated General Fund fund balance.
Recommendation
It is recommended that the city Council authorize the city
Manager to negotiate and execute a contract with David M.
Griffith and Associates to perform a comprehensive review of the
City's user fee structure, and appropriate $85,300 at account
number 01-110-205-000-506
Prepared by: John Jalili, city Manager
Lynne Barrette, Assistant City Manager
Mike Dennis, Director of Finance
Julia Griffin, Senior Management Analyst
- 4 -