Fiscal Year 2007 Proposed Fee Increases: From Subsidies to Cost Recovery

“I am for a government rigorously frugal and simple.”

- Thomas Jefferson

User fees are charged for City services that are either requested by the City’s customers or charged for the regulation of certain practices that affect the health or safety of Long Beach residents. In setting fees for these services, the City of Long Beach promotes cost recovery as a component of transparent, sustainable and responsible public management, allowing the City to concentrate resources on neighborhoods and protect the services they rely on.

In order to determine the City of Long Beach’s costs to provide services, the City conducted a citywide fee study starting in June 2005. The “Cost Recovery Study Findings Phase II” had several primary findings:

• Many fees and charges had not been modified to match costs for services for decades, some for almost thirty years.
• The City was subsidizing its fee-based services by about $10 million annually, or about 33 percent of the total costs for fee-based services.
• Such a subsidy, especially in times when the City struggles to achieve and maintain a structurally balanced budget, has the potential to force unnecessary service reductions.

The study was delivered to the City Council’s Budget Oversight Committee and shared with the community on the City’s Internet site in February 2006. On the basis of the study, the Budget Oversight Committee revised the City Council’s Financial Policy on User Fees and Charges, which was adopted by the entire City Council in July 2006. It states:

The City of Long Beach is empowered to recapture, through fees, up to the full cost of providing specific services. Regular and consistent review of all fees is necessary to ensure that the costs associated with delivery of individual services have been appropriately identified, and that the City is fully recovering those costs. It is the City’s policy to set user fees at full cost recovery levels, except where a greater public benefit is demonstrated to the satisfaction of the City Council, or when it is not cost effective to do so.

The City of Long Beach strives to create maximum value for the community not only in the approach to expenditures, but also in approaching revenue recovery. Hence, in an effort to begin implementing the City Council’s amended financial policy, the City Manager’s FY 07 Proposed Budget includes approximately 1,050 user fee and charge increases. These fees largely affect one-time use of services that benefit the individual, rather than services that create a greater public benefit. Additionally, the City emphasized preserving its financial support for youth and senior services.

While it would neither be possible nor advisable to increase all fees to 100 percent cost recovery in a single year, the City has committed to adjusting its fees at a measured pace over the next 2-3 years to eliminate historic subsidies that are not deemed to provide a greater public benefit.

The City of Long Beach is committed to the unique cache of resources and services that Long Beach is fortunate to offer and deems them integral to the rich character of the city. Recovering up to the total cost of a service is a simple, fair and transparent alternative to cutting award-winning services or to deficit spending. This allows the General Fund to increase resources towards general benefit, such as street repair and enhancing public safety. For questions or comments regarding the proposed changes please contact David Wodynski, Budget Management Officer at (562) 570-6688.