05 Staff Report - Public Management Group
COUNCIL AGENDA REPORT MEETING DATE: 10/18/04 ITEM NO. -5 DATE: OCTOBER 5, 2004 TO: FROM: SUBJECT: MAYOR AND TOWN COUNCIL DEBRA J. FIGONE, TOWN MANAGER ADOPTRESOLUTION AUTHORIZINGTOWNMANAGERTO
EXECUTE AGREEMENT WITH PUBLIC RESOURCE MANAGEMENT GROUP TO PERFORM AN OVERHEAD COST ALLOCATION STUDY AND RECOMMENDED USER FEE UPDATE/STUDY FORTHETOWN OF LOS GATOS WITH THE STUDY AMOUNT
NOT TO EXCEED $33,000, RECOMMENDATION: Adopt resolution authorizing Town Manager to execute an agreement with Public Resource Management Group to perform an overhead cost allocation
study and recommended user fee update/study for the Town ofLos Gatos. BACKGROUND: User fees are established for those services and functions the Town performs on behalf of private citizens
or groups, with the assumption that costs ofservices benefitting these individuals should be borne by the citizens or groups receiving the benefit, rather than the Town as a whole. The
Town's goal in setting User Fees is to accurately and faidy represent the true cost ofproviding these services and functions, as making a profit is not the objective for the Town in
providing services to the public. State law (constitutional and statutory -reference Prop. 4, Prop 218, and AG Opinion 92506) prohibits local government from charging more for a service
than the actual cost ofproviding the service. Otherwise, a User Fee becomes a tax and requires voter approval. In some circumstances, user fees do not reflect the full cost of providing
services. Economic incentives may be used as a means to encourage certain activities, or to promote public health functions. Activities which provide societal benefits in addition to
those services received by the individual or group, such as architectural and historical design review and appeal fees may also include some proportional considerations. In sum, user
fee calculations may include non-monetary __Clerk 6<:..c Finance 11:20 am IMlm4pijs"trative Services Director Reviewed by: __Assistant Town Manager ----\r:fHJ-.r-__Community Development
PREPARED BY: STEPHEN CONWAY, Finance, N:\FINANCE\User Fees\CounciI Report Approving PRM.wpd Reformatted: 5/30/02
PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION AUTHORIZING TOWN MANAGER TO EXECUTE AGREEMENT WITH PUBLIC RESOURCE MANAGEMENT GROUP TO PERFORM AN OVERHEAD COST ALLOCATION STUDYFORTHETOWNOF
LOS GATOS. (October 18, 2004) benefit and cost considerations in addition to service costs and adds to the complexity ofUser Fee Updates. To ensure User Fees are rational and defensible,
the Town utilizes a Overhead Cost Allocation Plan study in which the full cost ofproviding Town services are analyzed and calculated. The study will identify direct, indirect, and support
costs associated with providing services, as well as update procedures, labor rates, and time estimates. Financial data, cost calculations, service volumes, and current fee levels are
also part ofthe analysis which provides a nexus between the fees and the cost of services provided. The principal goal of a cost allocation study is to establish a consistent and objectively
based fee and rate structure that maximizes revenue and meets the needs of the government and its citizens. DISCUSSION: On September I, 2004, a request for proposal for professional
auditing/review services was sent out to several qualified finns to perfonn an Overhead Cost Allocation Study and Recommended User Fee Update/Study for the Town of Los Gatos. Three financial
finns submitted proposals. After assessing the three qualified proposals, staff selected Public Resource Management Group as the most qualified financial finn to perfonn the Town's overhead
cost allocation study. Public Resource Management Group is a local finn specializing on the analysis of the full cost of governmental services. The principal consult?-nt and owner has
a long history of providing professional consulting services to local government in California. Public Resource Management Group (PRM) was selected based on their quality of proposed
services, proposal price, and experience. PRM will develop the Town's cost allocation plan using generally accepted guidelines that meet all goals of the study and that that are set
forth by the State Controller's Office. Recent full cost allocation studies in other cities have cost between $40,000 and $50,000 dollars. With a more competitive marketplace, the Town
was fortunate to receive several aggressive bids running between $33,000 and $42,000. In addition to demonstrating a high level of local government experience, quality work standards,
and the ability to meet requested deadlines, PRM's bid price was the most competitive. CONCLUSION: PRMhas developed a work plan to begin the cost allocation and user fee plan study in
the first week ofNovember. PRM will meet with staffand obtain data to update cost plan and user fee data over the following six to eight weeks. Each department is provided an opportunity
to review the cost/revenue data PRM is developing to prepare the study, at least two separate times. This departmental review helps to ensure the raw data is as accurate as possible,
resulting in a more reliable final report.
PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION AUTHORIZING TOWN MANAGER TO EXECUTE AGREEMENT WITH PUBLIC RESOURCE MANAGEMENT GROUP TO PERFORM AN OVERHEAD COSTALLOCATION STUDYFORTHETOWNOF
LOS GATOS. (October 18, 2004) With approval ofthepreliminaryreportsinmid-January, 2005, PRMwill prepare final reports. This is to include an Executive Summary and Departmental management
reports summarizing detailed user fee and cost allocation plan worksheets to be reviewed at the February 7,2005 Town Council meeting. All the financial, transaction, and comparison data
is reported in the final management reports. PRM will also provide Town staff with User Fee software to be used for further analysis and minor updates. PRM will be available to attend
the February council meeting for questions and recommendations regarding potential fee policy issues and appropriate fee level questions if requested. For an additional fee of $2,000,
PRM offers a "Full Cost Analysis 101" workshop for Town decision makers to explain the process offull cost allocation, ifdesired. With Council's approval ofthe Cost Allocation and User
Fee study, staffwill utilize the study's recommendations to update the Town's User Fee Schedule for FY 2005/06 consistent with the Town's cost recovery policy. Staffis recommending the
adoption ofthe resolution authorizing the Town Manager to execute an agreement with Public Resource Management Group to perform an Overhead Cost Allocation Study and Recommended User
Fee Update/Study for the Town of Los Gatos. FISCAL IMPACT: The proposed contract amount is $33,000. IfCouncil requests a workshop, an additional $2,000 will be appropriated. Funding
is provided for in the Adopted FY 2004/05 Operating Budget, under program 1111-61502. Attachments: Resolution authorizing Town Manager to execute an agreement with Public Resource Management
Group to perform an overhead cost allocation study and recommended user fee update/study for the Town ofLos Gatos.
RESOLUTION NO. _ RESOLUTION OF THE TOWN OF LOS GATOS AUTHORIZING THE TOWN MANAGER TO EXECUTE AN AGREEMENT WITH PUBLIC RESOURCES MANAGEMENT GROUP TO PERFORM AN OVERHEAD COST ALLOCATION
STUDY AND RECOMMENDED USER FEE UPDATE/STUDY WHEREAS, The Town is in need ofan Overhead Cost Allocation Study and User Fee Update/Study; and, WHEREAS, Town staffreviewed qualified proposals
for these services and is recommending Public Resource Management Group as the most qualified firm to perform the studies; and RESOLVED, by the Town Council of the Town of Los Gatos,
County of Santa Clara, State ofCalifornia, that the Town ofLos Gatos enter into a agreement with Public Resources Management Group for Overhead Cost Allocation and User Fee Update studies;
and BE IT FURTHER RESOLVED that theTown Manager is authorized, and is hereby directed, to execute said contract/agreement in·the name and on behalf of the Town of Los Gatos. PASSED AND
ADOPTED at a regular meeting of the Town Council of the Town ofLos Gatos, California, held on the 18th day ofOctober, 2004 by the following vote: COUNCIL MEMBERS: AYES: NAYS: ABSENT:
ABSTAIN: SIGNED: MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST: CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA