City Council Causes Loss of Millions of Dollars in City Fees

Gary Silbiger

I consider myself a fiscal conservative always looking at ways of saving local government money so the city can increase jobs, services, and other basic needs. One source of revenue is city fees, yet they remain a hidden undercharged revenue item. Beginning in early 2006 prior to our current economic meltdown, I presented to the Council as a sitting Council member that Culver City should have all its city fees listed in one document and reviewed yearly to ensure that all fees are correctly calculated.

My suspicion of abuse was verified by the revelation of the small percentage of fees that applicants had been charged which directly affected the general fund. Is it a big deal? Definitely!

What are City fees?
Hundreds of fees are charged by Culver City including alarm systems, animal licensing, building permits, bus fares, business taxes, copying, curb painting, day camp fees, dumpsters, electrical permits, emergency transportation, environmental analysis, filming permits, fire prevention, GIS maps, mechanical permits, oil well permits, outdoor dining, permit for removal of street trees, plan checks, plumbing permits, police reports, preferential parking, refuse collection, swim fees, storm water pollution prevention plan, taxi permits, traffic impact analysis reports, and much more.

How are City fees calculated?
To find the cost of each of the hundreds of fees, the City calculates staff time (and gives it a salary and benefit dollar amount), departmental overhead, citywide overhead, and various additional staff costs.

What is the problem?
Once Culver City calculates the cost to the city for each fee, it then decides what percentage it will collect from the applicant and how much the city will pay from its general fund - the source of most of our city services - to make up the difference. It is illegal for a city to make a profit from a fee. However, because Culver City does not charge the applicant all of its costs (100%), the city has to subsidize that applicant by dipping into the general fund to pay the remainder of the fee. Although charging minimal fee costs to individuals and businesses benefits them individually, collectively it means less city revenue for needed services, programs and jobs.

The Beginning - 2006:
To try to evaluate Culver City’s fee schedule and to create a template that could be used in the future reports, the City Council hired a consultant, Public Resource Management Group (PRM) in 2006. For more than 15 years beforehand, Culver City had not raised City fees even though its costs increased. During all of these years, and through today, Culver City has charged the user far less than it costs the city for each fee, thus having to take the remainder from our under-nourished general fund. This has hurt us all.

In PRM’s 2007 study of Culver City, (found as an attachment to the May 7, 2007 City Council agenda) it reviewed the following departments and divisions that were responsible for the city’s fees: Planning; Building and Safety; Public Works; Parks, Recreation and Community Services; Police; and Fire. This fiscal year 2006/2007 report shows that 19% of all City costs - over $12,000,000 - came from User Fee Services, which is the topic of this article. In that fiscal year, only 45% of the costs for the City fees were paid by the user, resulting in a full 55% subsidized by the City from its general funds. Parks, Fire, Education, Social Services, Police and much more were robbed of the many services that would otherwise have been provided. Of course, the Parks, Recreation, and Community Services Department is expected to provide some services without being fully reimbursement by the community; this is a policy decision that most governments allow. But, why was Planning only collecting 15% of its costs, Public Works only 25%, Building and Safety 58%, Police 57%, and Fire at 60%? That came out to a whopping $6,638,000 - yes, that’s millions - that had to be taken out of the general fund for just that one fiscal year. Even if Parks, Recreation and Community Services are omitted from that year’s figures, the City still lost $3,711,790. And this policy was in place for at least the previous 15 years. No wonder Culver City is broke!

For the first fiscal year studied, 2007/2008, the City recommended only a $715,500 increase in city fees, still leaving millions of dollars paid for with our city money. Four of the five Council members - Alan Corlin, Carol Gross, Scott Malsin, and Steve Rose - voted to approve the minimal increase in City fees based on an out of date comparison-listing of 15 California cities, only 2 within Los Angeles County. My motion to increase the money paid by the applicants for their City fees was not seconded. Go to www.culvercity.org, click on “government”, then “meetings and agendas” then “meeting agendas”, then “City Council 2007”: See the May 7, 2007 City Council Agenda report.

For Culver City’s second annual City fee report made for the 2008/2009 fiscal year, City staff recommended only a 4% increase in fees because City salaries were raised 4% the previous year. This imprecise guess actually put Culver City further from collecting all the money due for each City fee because the cost calculation for each fee includes more than merely city salaries. And, the city was so far behind reaching the 100% recovery rate from the user that it resulted in a yearly loss of more than a million dollars. In that fiscal year, Parks, Recreation and Community Services charged 48% of its costs to the public, Fire 57%, Public Works 66%, Police 87%, and Building and Safety 92%. That left the City’s general fund to subsidize $1,241,549 that year. The Council passed the recommended resolution. (See the June 23, 2008 City Council agenda report).

For Culver City’s third annual fee report compiled in 2009/2010, the City recommended a small increase in cost recovery in Building and Safety, Engineering, Planning, Fire, and Police. The City Council passed a resolution changing the City’s recovery percentage while suffering another damaging blow to its economy. Once again the general fund had to pay, this time $344,360. (See the May 11, 2009 City Council agenda report).

In Culver City’s fiscal year of 2010-2011, still no department collected 100% of its costs for fees, the closest being Building and Safety at 95% and the Police hovering at 90%. (See the April 5, 2010 City Council agenda report). Once again, the Council voted to use its general fund money to help pay for fees that were owed by the applicants, this time at $379,531.

Now:
In our current fiscal year of 2011-2012, only the Parks Department increased its recoupment of fees, and that by 1%. The Parks Department is the one department whose fees should not be increased. What about the other departments? In partial figures, without information about the Public Works Department, the City’s general fund paid $338,400 to subsidize the low city fees paid by its users.

This leads to the conclusion that requiring each fee user to pay 100% of the City’s cost (other than certain programs in the Parks, Recreation, and Community Services Department and preferential parking, for instance) is the only fair result. Of all the reluctant Council members, Scott Malsin most vociferously argued that it was unfair to require fee users to pay their full amount for the Planning, Building and Safety, Public Works, Police, and Fire Department fees. Yet, Council members have an obligation to protect our city funds so that it can be used for jobs and services, not to pay for city fees that businesses and individuals can easily afford. Now we know the reason why so many worthwhile programs and services have been rejected or cut.

But there’s still hope. Contact your 5 Council members and demand that they charge the full 100% of the fees where appropriate beginning now.

And, what suggestions do you have for Culver City to spend the additional $350,000 annually?

Gary Silbiger is the Co-Editor of the Culver City Progress Blog and a former Mayor of Culver City.