Cost Accounting in Local Government

How Often is Enough?

As a fee consultant, the question that I get asked most often is, “How often should we be updating our fees?”  Once I dispose of the self-serving answer of, “Why, every year, of course,” that leads to the more serious question of how often is enough. Because, as we all know, no one wants to take fees before their Council more often than they have to.

For operational fees, like Building Permits and Planning applications, the quick and easy answer is every three to five years.  But the longer answer is that it depends.  It depends on how much your organization has changed since the last fee review.

Has the staffing level changed, either up or down? Less staffing could mean higher fees if lower paid staff were laid off and the remaining workload is now performed by higher paid staff.  Has there been a reorganization that has resulted in different people doing different things?  Have you been through a streamlining process that created a one-stop permit center?  Has there been a change in salaries or benefits aside from the usual CPI increases that have caused costs to go up or, most likely, down?

If you have experienced any of these things, then it is time to review your fees.

For capital impact fees there is another set of factors that you should be aware of. A full review of your capital fees is recommended after General Plan changes, completion of new Master Plans, or major changes to existing ones.  Likewise, you are also due for a full review if there are major construction cost changes or changes in the delivery of service.

You should also keep track of land prices in regards to your parks fees. If land prices are growing at a fast pace, then your Quimby fees won’t go nearly as far as you expected them to go.

Like with the operational fees, once you get past five years from the last review, construction costs are stale, General Plans have changed, Master Plans have been updated, etc.  There are typically lots of changes after five years.

But in the meantime, you should be annually updating all of your fees by inflation (except Recreation fees, but that is another article), whether it is the standard CPI in your area or a calculation based on your agency’s salary and benefit increases. For the capital fees, you should use the Engineering News Record Construction Cost Index, or something similar, to capture the growth in the cost of construction.

I have mentioned five years as the outside parameter because by that point, even with CPI increases, your fees are most likely not recovering their costs.  Things change and your last fee review was a snapshot in time that is getting further and further away in the rear-view mirror.

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