CC Resolution No. 24-041 adopting User Fee Cost Recovery PolicyRESOLUTION NO. 24-041
A RESOLUTION OF THE CUPERTINO CITY COUNCIL ADOPTING
USER FEE COST RECOVERY POLICY
WHEREAS, the Cupertino City Council has identified a need to adopt a
policy governing general guidelines for establishing and maintaining a
comprehensive user fee schedule to ensure the City adequately recovers costs for
the provision of services, benefits, or privileges (Services) in an efficient, legal, and
accountable manner; and
WHEREAS, on May 14, 2024, the City Council considered proposed policy
at a duly noticed special meeting of the City Council.
NOW, THEREFORE, BE IT RESOLVED that:
1. The City Council hereby adopts the User Fee Cost Recovery Policy attached
hereto as Exhibit A. The Policy shall be effective on July 14, 2024.
PASSED AND ADOPTED at a special meeting of the City Council of the City of
Cupertino this 14th day of May, 2024, by the following vote:
Members of the City Council
AYES: Mohan, Fruen, Chao, Moore, Wei
NOES: None
ABSENT: None
ABSTAIN: None
SIGNED:
________
Sheila Mohan, Mayor
City of Cupertino
________________________
Date
ATTEST:
________
Kirsten Squarcia, City Clerk
________________________
Date
6/3/24
6/3/24
USER FEE COST
RECOVERY POLICY
Citywide Policy Manual
Attachments: N/A
Effective Date:
July 14, 2024 per Resolution 24-041
Responsible Department:
Administrative Services
Related Policies & Notes:
Purpose
To provide general guidelines for establishing and maintaining a comprehensive user fee
schedule to ensure the City adequately recovers costs for the provision of services, benefits, or
privileges (Services) in an efficient, legal, and accountable manner.
Background
The City conducts comprehensive Cost Allocation Plans (CAP) and Fee Studies on a seven-year
cycle to assess the alignment of current fees with the actual cost of providing each service. CAP
establishes a data-driven methodology for distributing administrative and overhead charges to
programs and services, while a Fee Study determines the full cost of services for which fees are
charged. The most recent study, presented during the February 6,2024, City Council Meeting,
recommended the adoption of a formal cost recovery policy across all service sectors, including
General, Engineering, Building, Planning, and Parks and Recreation. The CAP and Fee Study
guided the crafting of the policy by City staff, aligning closely with Council directives and
recommendations.
Between CAP and fee studies, the City adjusts fee schedules annually to reflect changes in the
Consumer Price Index (CPI), the Bay Area Construction Cost Index (CCI), or changes in budgeted
labor costs. These adjustments require annual review and approval by the City Council to ensure
fees accurately reflect current service costs, accommodate new City services, and eliminate fees
for discontinued services.
Policy
The policy has three main components:
•Provision for ongoing review
• Process of establishing cost recovery levels
o Factors to be Considered
•Target Cost Recovery Levels
o General ranges
o Target cost recovery by service area
Attachment A
Provision for ongoing review
Fees will undergo annual reviews to ensure they remain aligned with changes in the cost of living
and evolving methods or levels of service delivery. To facilitate an evidence-based approach to
this review process, the City will conduct a CAP and Fee Study every seven years. During the
interim periods, fee adjustments will be made based on annual cost factors, such as the Consumer
Price Index (CPI), the Bay Area Construction Cost Index (CCI), or changes in budgeted labor
costs.
Furthermore, should a significant fee increase be warranted after the completion of the study, the
fee structure may be phased in over a period of 2-3 years to reach the desired cost recovery rate.
This proactive approach ensures that our fee structures remain fair, transparent, and reflective of
current economic conditions and service standards.
Process of establishing user fee cost recovery levels
The following factors will be considered when setting service fees and cost recovery levels:
1.Community-wide vs. private benefit
a.The use of general purpose revenue is appropriate for community-wide services
while user fees are appropriate for services that are of private benefit to
individuals or groups. Full cost recovery is not always appropriate.
2.Service recipient vs. service driver
a.Particularly for services associated with regulated activities (development review,
code enforcement), from which the community eventually benefits, cost recovery
from the "driver" of the need for the service (applicant, violator) is appropriate.
3.Consistency with City public policies and objectives
a.City policies and Council goals focused on long-term improvements to community
quality of life may also impact desired fee levels, as fees can be used to change
community behaviors, promote certain activities, or provide funding for the
pursuit of specific community goals, for example, health and safety,
environmental stewardship.
4.Impact on demand (elasticity)
a.Pricing of services can significantly impact demand. At full cost recovery, for
example, the City is providing services for which there is a genuine market not
over-stimulated by artificially low prices. Conversely, high-cost recovery may
negatively impact lower-income groups, and this can work against public policy
outcomes, especially if the services are specifically designed to serve particular
groups.
5.Discounted Rates and Surcharges
a.Rates may be discounted to accommodate lower income groups or groups who
are the target of the service, such as senior citizens or residents.
b.Higher rates are considered appropriate for non-residents to further reduce
general fund subsidization of services.
Attachment A
6. Feasibility of Collection
a. It may be impractical or too costly to establish a system to appropriately identify
and charge each user for the specific services received. The method of assessing
and collecting fees should be as simple as possible in order to reduce the
administrative cost of collection.
Target cost recovery levels
1. Low-cost recovery levels (0% - 30%) are appropriate if:
a. There is no intended relationship between the amount paid and the benefit
received
b. Collecting fees is not cost-effective
c. There is no intent to limit the use of the service
d. The service is non-recurring
e. Collecting fees would discourage compliance with regulatory requirements
f. The public at large benefits even if they are not the direct users of the service
2. Services having factors associated with both cost recovery levels would be subsidized at
a mid-level of cost recovery (31% - 80%).
3. High-cost recovery levels (81% - 100%) are appropriate if:
a. The individual user or participant receives the benefit of the service
b. Other private or public sector alternatives could or do provide the service
c. For equity or demand management purposes, it is intended that there be a direct
relationship between the amount paid and the level and cost of the service
received
d. The use of the service is specifically discouraged
e. The service is regulatory in nature
Schedule/Service Area Target Cost Recovery Range
Schedule A – General 100%
Schedule B – Engineering (PW) 75-100%
Schedule C – Building 80-100%
Schedule D – Planning 50-80%
Schedule E – Recreation* Market-driven
*Parks and Recreation Fees exclusion – fees will be administratively updated per Resolutions No. 04-
350, authorizing the City Manager to set all recreation fees.
Revisions:
Attachment A