Palo Alto Weekly

News - September 20, 2013

Palo Alto seeks to recoup more of the costs of its programs

Study shows fees net just 35 percent of what it costs city to mount services

by Gennady Sheyner

If the city budget is a reflection of community values, it's safe to say Palo Alto residents have a particular fondness for animals, community theater and nature hikes.

Financially speaking, however, park maintenance, Children's Theatre programs and animal services are a raw deal. They are on the low end of the city's "cost recovery" scale, which weighs the costs of providing services against the fees the city charges. According to a new study from the firm MGT, which was commissioned by the city, these services have plenty of company. The Community Services Department's recreation programs for teens recovered only 30 percent of their costs in 2012. Special events like the popular Summer Concert series recovered just 14 percent. Exhibits at the Junior Museum and Zoo recovered just 2 percent.

In many cases, the city isn't looking for full cost recovery. According to an annual City Auditor's Office report, Palo Altans consistently give rave reviews to the city's recreational offerings, public subsidies or not. And a recent effort by the City Council to save money by outsourcing the city's animal-services operation ultimately fizzled because of community resistance. Clearly, many think the money is well spent.

Still, city leaders feel they can do better when it comes to cost recovery, which totals $10.7 million and does not include those fees associated with planning and development. On Tuesday evening, the City Council's Finance Committee discussed the MGT report and directed staff to draft a "fee recovery policy" that the council will ultimately consider and possibly adopt. The policy will attempt to address which services should strive to achieve "high cost recovery" (between 70 percent and 100 percent of the cost of service), which should aim for "medium" (30.1 percent to 70 percent) and which should remain "low" (0 to 30 percent). Once that policy is in place, the council plans to overhaul the municipal fee schedule for consistency with the new policy.

In some instances, the "low" cost recovery is easy to justify. Walter Rossmann, director of the city's Office of Management and Budget, used the extreme example of police calls. If the city were to start charging for police calls, a resident might be less likely to report the burglary across the street. Similarly, if the city were to significantly raise prices for fire inspections (the Fire Department's total cost recovery is 57 percent), it could deter some building owners from taking all the necessary fire-prevention measures, which could endanger both that building and neighboring properties and increase the need for future Fire Department responses.

Councilman Greg Schmid wondered Tuesday if raising the costs of approving building updates would "discourage updates in buildings that we want to encourage." He noted that the $300 fee the city currently charges for installation of automatic fire sprinklers achieves a 27 percent cost recovery. To reach 100 percent, the fee would need to be raised to $1,108.

"In these cases why should the goal be 100 percent?" Schmid asked.

For many services, it won't be. There is a reason why most departments are now at a "medium" level when it comes to cost recovery, according to Rossmann. Still, the new study suggests that the city can do a lot better when it comes to recouping costs. Rossmann said cost recovery shouldn't always be "full" but should in most cases be in the "high" range. In cases where fees would have to be raised substantially, these adjustments would be raised gradually, over a number of years.

The study looked at 650 different fees, excluding the development and planning fees, and found that the city has recovered about 35 percent of its service costs. The General Fund subsidized the other 65 percent, which came out to roughly $20 million. Some services, like the Palo Alto Municipal Golf Course, generally recoup all their costs through fees. Another 34 fees generated a cost recovery greater than 100 percent, suggesting that a reduction might be in order.

The city's attempt to create its first "cost recovery policy" isn't exactly stirring the populace yet, but it might cause some local angst next summer, when the city adopts its next Municipal Fee Schedule. The study recommends raising the city's overall cost-recovery level from 35 percent to 38 percent, which would mean the city's fee revenues would go up from $10.7 million to $11.8 million. Whether or not this effort will cause a stir will depend on which fees the council ultimately decides to raise, a decision that will occupy the Finance Committee and the full council in the first half of next year.

Councilman Pat Burt, who chairs the committee, stressed the importance of the "cost of service" study and the need to carefully think through the report's implications before proceeding with changes.

Burt rejected staff's initial recommendation to bring the new policy for cost recovery directly to the council and lobbied successfully to have the Finance Committee hold another meeting on the new study. Burt said he was worried that the city is "rushing through something of a greater concern to the community and to us as council members than may be perceived."

The council, he said, will have to think about ways to make the needed changes while remaining sensitive to community values. He voiced concerns about the council "being lulled into thinking that this will go over easy." The fees in the schedule would affect many different constituencies, from animal lovers to theater goers. Burt warned that there is an "underestimation about how this will be received in the community."

"We have residents who just deeply value living in this community and the services provided in this community," Burt said. "They assume they will continue along the lines they always have and changes to those are very sensitive matters."

Vice Mayor Nancy Shepherd agreed with Burt that the subject is an important one but said she would support checking in with the full council before having the Finance Committee get down to the nitty-gritty details of adjusting fees. But all committee members (Marc Berman is the fourth) praised the new report. Burt said it would allow the council to make decisions on a more rational and less subjective basis, though he noted that subjective decisions will still be a part of the process.

Staff Writer Gennady Sheyner can be emailed at gsheyner@paweekly.com.

Comments

Posted by palo alto residenta, a resident of Embarcadero Oaks/Leland
on Sep 20, 2013 at 9:35 am

Recovering the cost of many of the City's services is a wonderful idea. Programs and services which are used by only a small (but usually very vocal and enthusiastic) number of residents should be the first to be pushed towards self-sufficiency.

Using a combination of realistic fees and fundraising, more of the cost could be born by the participants rather than all the City residents. Raise the price of all programs for non-residents vs. residents. Provide scholarships for low-income residents.

The fact that our Junior Museum, which is a wonderful place, recovers only 2% of its costs is ridiculous.


Posted by Neilson Buchanan, a resident of Downtown North
on Sep 20, 2013 at 10:43 am

The Council is on the right track. There can be rational levels of cost recovery. I vote for low recovery for the Junior Museum; however, if it were remodeled and used for an adult event (like many musuems)then full cost recovery can be levied.

Recently I asked about using the community meeting room at Miki's Market. At first I was staggered by the city's hourly charges for the room (a public benefit from the developer), but on second thought the city should recover its costs for administration and cleanup. Doesn't really matter..I was able to negotiate less cost from local hotel for using a nice meeting room all day vs a few hours at Miki's. Another example of irrational public benefits granted to a developer???


Posted by Bloat?, a resident of Midtown
on Sep 20, 2013 at 10:46 am

Cost recovery is good but cost reduction should be considered. I switched from city sponsored exercise classes to the Y because the classes are as good or better and I am paying a bit over half of what I was paying for the city classes.


Posted by Wayne Martin, a resident of Fairmeadow
on Sep 20, 2013 at 11:05 am

Link below to study, on City's web-site--

Cost-of-Services Study:
Web Link


Posted by DWC, a resident of The Greenhouse
on Sep 20, 2013 at 11:39 am

I find it curious that there is little to no discussion of Palo Alto living within its means (sales tax receipts, property tax receipts, utility related net revenues, etc.). But looking for places to squeeze out another $100 to $1,000 seems to have its own unintended consequences. One such consequence could be the morale risk of having an attempt to go to the Junior Museum result in a parent and child being turned away for the inability to pay.

Would Palo Alto set up a scholarship fund for those who cannot afford the fee (would the administrative needs only increase city staffing).

Since we live in a community by definition there will be instances where the city funds items that I might not agree with but there is a greater good in my not imposing my will.

Perhaps we can have a thoughtful discussion on the topic.


Posted by Curious, a resident of South of Midtown
on Sep 20, 2013 at 1:06 pm

So does the majority of city funds now go to pay for staff salaries and that of retirees that are not really retired, but that collect a hefty package from Palo Alto and take full, or part time, jobs in near-by cities?

Infrastructure work in Palo Alto is paid for by the county programs, such as VTA. Maybe the county will pick up the tab for these community services programs too. The county transportation agencies are very generous with their money.

With more and more stack and pack projects going up, there will be a lot more people for whom to provide community services.


Posted by ambulance=good return, a resident of Another Palo Alto neighborhood
on Sep 20, 2013 at 4:17 pm

Ambulance rides seem to offer excellent returns. A recent trip to the ER (2 blocks) was billed at $1500. B


Posted by a senior, a resident of Adobe-Meadows
on Sep 20, 2013 at 5:21 pm

I take all my senior art and exercise classes at either Mountain View or Los Altos since the classes cost so much less! My utilities are going up and up and services are getting cut,
it's not what I moved to Palo Alto for.


Posted by Resident, a resident of Another Palo Alto neighborhood
on Sep 20, 2013 at 5:35 pm

Interesting that the article mentions that the Junior Museum recovers 2% of its costs. It is something that my family used on many occasions for a short time when they were young.

Even more interesting is to talk about the Childrens Theatre but no mention of what percentage of its costs are recoved. I think this should have been included. The Childrens Theatre is beloved by some families and the rest of us don't get involved because it is something that takes a bigger time commitment than say the Junior Museum.

What is ludicruous is that families who get involved in Childrens Theatre have their after school activity for free. Those who would rather play sport, do music or art, or other activities, don't get it for free. All these programs are just as good for the wellbeing of the children involved. It would be unfair to say that one was superior to the wellbeing of children over another. However the continued situation remains.

I hope that the Childrens Theatre is being looked at when it comes to recovering some of its costs.


Posted by Mr.Recycle, a resident of Duveneck/St. Francis
on Sep 20, 2013 at 9:54 pm

@Bloat - yes! reduce costs, not recoup costs. They are just talking about passing on the inefficiency of the city government instead of dealing with it.


Posted by common sense, a resident of Midtown
on Sep 21, 2013 at 12:42 am

The report says that the direct & indirect costs of the Children's Theater is around $1.75 million, and that 25% of the costs are recovered.


Posted by Agreed, a resident of Old Palo Alto
on Sep 21, 2013 at 10:03 am

Agree totally with Bloat, cost recovery is great, but consider cost reduction first and last.T


Posted by Juno, a resident of Another Palo Alto neighborhood
on Sep 21, 2013 at 12:01 pm

I was told by another Palo Alto resident that schools in other cities send bus loads of kids on excursions to Palo Alto's Junior Museum and Zoo. Do they pay for this use of the Junior Museum and Zoo? They should be charged fees because why should Palo Alto taxpayers pay for providing these services to other cities? Not to mention the added congestion.

I believe that non-Palo Alto residents follow a separate fee schedule for reserving picnic tables at Palo Alto Parks, and it makes sense to me that non-residents should be charged extra for using City services.

Palo Alto Weekly, could you provide information as to what services are utilized by non-residents and whether they pay more than a Palo Alto resident for those services.


Posted by Wayne Martin, a resident of Fairmeadow
on Sep 22, 2013 at 10:02 am

If one takes the time to review the City budgets for a decade, or so, it's clear that many of the so-called "programs" offered by the City are for non-residents. The golf course, the airport, and the art center, for instance, all claim to have constituencies/customers/patrons in the range of 70+% that are non-residents. Other programs, like the library, claim that about 20% of its circulation is for non-residents. Even the police point out that about 2/3rds of its traffic stops are for non-residents. The soccer fields are routinely dominated by non-residents. And then there is the Cubberley Center, which caters heavily to non-residents, although its not clear if anyone knows exactly what percentage of the Center's users are not Palo Alto residents.

It's pretty clear that Palo Alto can not afford all of the "amenities" that it has created for itself--so these services/programs need to attract/service non-residents in order to exist. The City has not really done a good job tracking the costs of these programs (in my opinion). If it has, they haven't shared that information with the public on a yearly basis.

Over the years, there has been a sentiment expressed that: "Palo Alto is a rich town—so it must share its wealth with its less fortunate neighbors". So, that brings us to today—when its clear that the cost of "sharing the wealth" is quite large, and probably more out-of-control, than in-control.

Many requests to the City to create a matrix of services/programs, which would identify the users, costs and revenues for these programs has not resulted in anything particularly meaningful. Having such data would help the Administration to put these programs on a Profit&Loss footing. Too many people have come to believe that if the City makes something available, it's free. Since nothing is really free, it's time to start publishing the costs, so we all can understand where our money is going, and who are the primary beneficiaries of these City-provided services.


Posted by Resident, a resident of Another Palo Alto neighborhood
on Sep 22, 2013 at 1:24 pm

Of course the airport is brought up again.

Of course the airport is not a city service since all cities are not going to have their own airport. It is however a county service and should be judged accordingly.

The airport should be serving Santa Clara County because it is situated in Santa Clara County. It is not like a park, a library, or a soccer field.


Posted by Wayne Martin, a resident of Fairmeadow
on Sep 22, 2013 at 2:15 pm

> Of course the airport is not a city service since all cities
> are not going to have their own airport. It is however a
> county service and should be judged accordingly.

You are aware that the City of Palo Alto is planning to operate this airport as a City-provided service in the not-too-distant future?


Posted by Crescent Park Dad, a resident of Crescent Park
on Sep 23, 2013 at 6:43 am

@ senior: CPAU rates (including fees collected for the city general fund) are still far lower than PG&E, CA water, etc. No offense, but that is a convenient but ill-targeted rant that just doesn't add up when compared to the utility costs in other cities.

My 82 year old mother still lives our house in Menlo (on her own) and her utility costs are almost twice of what we pay for our full house here in PA.


Posted by Wayne Martin, a resident of Fairmeadow
on Sep 23, 2013 at 9:01 am

> mother's home in Menlo Park

Utilities bills are a function of cost per commodity billing unit, and actual use. Without comparing the rates, and actual uses, floor sizes and heat retention, of two different dwelling units in two different service areas, a casual observation that one bill is higher than another doesn't really mean much.

Palo Alto's electricity rates are lower than PG&E's, but its natural gas rates are somewhat higher, on average. Water, trash pickup, and sewage charges seem to be mid-range of other local cities.

One must either compare specific utilities on a per-unit-consumed basis, or do a basket-of-services comparison, in order to make any meaningful comparison. Palo Alto has increasingly been moving services that have historically been funded by the City's General Fund on the Utility bill, in both direct, and indirect, ways. Street lighting is not hidden in our electrical bill. Street sweeping now is a direct charge on our utility bills, as is storm drain maintenance. Additionally, there is a roughly 7% tax on the bill.


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