HomeMy WebLinkAbout03.07.2023 Finance Committee Agenda PacketCity Council Finance Committee Agenda March 7, 2023
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SARATOGA CITY COUNCIL
FINANCE COMMITTEE
MARCH 7, 2023
4:00 P.M. REGULAR MEETING
Public Participation Information
In accordance with Saratoga City Council’s Remote Public Participation Policy, members of the
public may participate in this meeting in person at the location listed below or via remote
attendance using the Zoom information below.
Members of the public can view and participate in the meeting by:
1. Attending the meeting in person in the Linda Callon Conference Room located at 13777
Fruitvale Avenue, Saratoga CA 95070; OR
2. Accessing the meeting through Zoom
* Webinar URL https://us02web.zoom.us/j/87190226599
* Webinar ID: 871 9022 6599
* Calling 1.669.900.6833 or 1.408.638.0968
Written Communication
Comments can be submitted in writing at www.saratoga.ca.us/fc. Written communications will
be provided to the members of the City Council and included in the Agenda Packet and/or in
supplemental meeting materials.
Public Comment
Members of the public may comment on any item for up to three (3) minutes. The amount of
time for public comment may be reduced by the Mayor.
Meeting Recording Information
In accordance with the Saratoga City Council’s Meeting Recording Policy, the City Council
Finance Committee Meetings are recorded and made available following the meeting on the
City website.
City Council Finance Committee Agenda March 7, 2023
Page 2 of 3
CALL TO ORDER
ROLL CALL
Public Comment
AGENDA ITEMS
1. Finance Committee Minutes
Recommended Action:
Review and approve the minutes for the February 7, 2023 meeting.
Finance Committee Minutes
2. Retiree Healthcare Plan June 30, 2022, Actuarial Valuation and GASBS 75 Disclosure Report
June 30, 2023
Recommended Action:
Receive the GASBS 75 Disclosure Report.
Memo - Retiree Healthcare Plan June 30, 2022 & Actuarial Valuation and GASBS 75
Attachment A - Retiree Healthcare Plan - June 30, 2022 GASBS 75 Accounting Information
Attachment B - Retiree Healthcare Plan Slide Presentation
3. Draft Report on Cost of Services (User Fee) Study
Recommended Action:
Receive the Cost of Services (User Fee) Study Report
Memo - Draft Report of Cost of Services (User Fee) Study
Attachment A - DRAFT Report on Cost of Services (User Fee) Study
ADJOURNMENT
CERTIFICATE OF POSTING OF THE AGENDA, DISTRIBUTION OF THE AGENDA PACKET,
COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
I, Gina Scott, Administrative Analyst for the City of Saratoga, declare that the foregoing agenda
for the meeting of the City Council Finance Committee was posted and available for public
review on March 2, 2023, at the City of Saratoga, 13777 Fruitvale Ave., Saratoga, CA 95070, and
on the City’s website at www.saratoga.ca.us.
Signed this 2nd day of March 2023 at Saratoga, California.
Gina Scott, Administrative Analyst
In accordance with the Ralph M. Brown Act, copies of the staff reports and other materials
provided to the Committee by City staff in connection with this agenda, copies of materials
distributed to the Committee concurrently with the posting of the agenda, and materials
distributed to the Committee by staff after the posting of the agenda are available on the City
City Council Finance Committee Agenda March 7, 2023
Page 3 of 3
website at www.saratoga.ca.us and are available for review in the office of the City Clerk at
13777 Fruitvale Avenue, Saratoga, California.
In compliance with the Americans with Disabilities Act and the Governor’s Executive Order, if
you need assistance to participate in this meeting, please contact the City Clerk at
bavrit@saratoga.ca.us or call 408.868.1216 as soon as possible before the meeting. The City will
use its best efforts to provide reasonable accommodations to provide as much accessibility as
possible while also maintaining public safety. [28 CFR 35.102-35.104 ADA title II]
City Council Finance Committee Minutes – February 7, 2023
Page 1
MINUTES
SARATOGA CITY COUNCIL FINANCE COMMITTEE
MEETING
FEBRUARY 7, 2023
CALL TO ORDER
The meeting was called to order at 4:10 p.m.
ROLL CALL
Present: Mayor Kookie Fitzsimmons, Council Member Page, Council Member Walia
Also Present: James Lindsay, City Manager
Nick Pegueros, Administrative Services Director
Agnes Pabis, Finance Manager
Gina Scott, Administrative Analyst
REPORT ON POSTING OF THE AGENDA
The Administrative Analyst reported the agenda for this meeting was properly posted on January
31, 2023.
AGENDA ITEMS
1. Finance Committee Minutes
Recommended Action:
Approve the minutes for the January 10, 2023, Finance Committee Meeting.
PAGE/FITZSIMMONS MOVED TO APPROVE THE MINUTES FOR THE JANUARY 10, 2023
FINANCE COMMITTEE MEETING. MOTION PASSED BY VERBAL ROLL CALL. AYES:
PAGE/FITZSIMMONS NOES: NONE. ABSTAIN: NONE.
2. Fee Study Results Review
Recommended Action:
Receive the 2022-23 Comprehensive Fee Study Project results and provide input on City staff’s
cost recovery recommendations.
Gina Scott, Administrative Analyst, presented a brief overview of the Fee Study project and
introduced Matrix Consulting Staff to provide a presentation of the Fee Study results.
Finance Committee directed staff to return with additional fee analysis demonstrating the
cumulative impact of increased fees, at various recovery levels and up-to full cost recovery,
with any additional fees imposed by other agencies at building permit issuance.
DIRECTION PROVIDED TO STAFF. NO VOTE TAKEN.
3
City Council Finance Committee Minutes – February 7, 2023
Page 2
3. Request for Proposals for Independent Auditing Services
Recommended Action:
Approve the request for proposal (RFP) for independent auditing services for the fiscal year
ending June 30, 2023.
Agnes Pabis, Finance Manager, presented an overview of the RFP for Auditing Services. Staff
confirmed that the RFP requires the selected firm to provide independent audit services to
West Valley Clean Water Authority, upon the Authority’s request, and under separate
professional services contract with the Authority. Staff also highlighted that the independent
auditor is selected by the City Council and requested that the Finance Committee designate
two Councilmembers to serve on the RFP screening committee.
PAGE/FITZSIMMONS MOVED TO APPROVE THE REQUEST FOR PROPOSAL FOR
INDEPENDENT AUDITING SERVICES AND DESIGNATE COUNCIL MEMBER PAGE AND
MAYOR FITZSIMMONS TO SERVE ON THE AUDITOR SCREENING COMMITTEE. MOTION
PASSED BY VERBAL ROLL CALL. AYES: PAGE/FITZSIMMONS NOES: NONE. ABSTAIN: NONE.
4. November Finance Committee Meeting
Recommended Action:
Cancel the Finance Committee’s November 28, 2023 regular meeting, and schedule a special
meeting the week of November 27th.
Nick Pegueros, Administrative Services Director, identified a scheduling conflict with the
November 28th regular meeting and requested an alternative meeting date on the week of
November 27th.
Committee Consensus
Cancel the November 28, 2023 meeting, and schedule a special meeting on November 27,
2023, at 4:00 p.m., to receive the independent auditor’s report on the fiscal year ended June
30, 2023.
CONSENSUS DIRECTION TO STAFF. NO VOTE TAKEN.
5. City Council Financial Policies and General Financial Operating Policies Review
Recommended Action:
Receive report on the annual Financial Policies for fiscal year 2023-24 and request changes or
updates to the policies as well as completing a review of the City’s reserve policies.
Nick Pegueros, Administrative Services Director, provided the committee with the City Council
Financial Policies and the General Financial Operating Policies.
4
City Council Finance Committee Minutes – February 7, 2023
Page 3
James Lindsay, City Manager, proposed the idea of adding a Community Grant Reserve Policy.
Consensus Direction
Return with draft policy to provide greater certainty to community grant recipients through a
new General Fund reserve policy.
CONSENSUS DIRECTION TO STAFF. NO VOTE TAKEN.
ADJOURNMENT
PAGE/FITZSIMMONS MOVED TO ADJOURN THE MEETING AT 5:11 PM. MOTION PASSED BY
VERBAL ROLL CALL. AYES: PAGE/FITZSIMMONS. NOES: NONE. ABSTAIN: NONE.
Minutes respectfully submitted:
Gina Scott, Administrative Analyst
City of Saratoga
5
DATE: March 7, 2023
TO: Finance Committee
FROM: Nick Pegueros, Administrative Services Director
SUBJECT: Retiree Health Care Valuation and Disclosure Report (GASB Statement
No. 75)
Summary. This agenda item transmits the results of an actuarial valuation of the
City's retiree medical benefit (Attachment A) as required by Governmental
Accounting Standards Board (GASB) Statement No. 75. The valuation reflects an
unfunded retiree medical benefit liability of approximately $2.3 million for the fiscal
year ending June 30, 2023. The GASB does not mandate funding of unfunded retiree
medical liabilities. However, the Finance Committee may recommend considering a
funding strategy or policy, which City Council ultimately decides. City staff
recommends Finance Committee consider adding a future agenda item to the
Committee's work plan this Summer or Fall.
Accounting Standard. GASB Statement No. 45 required employers to value and
disclose obligations resulting from post-employment benefits other than pension,
commonly referred to as "OPEB," beginning in fiscal year 2008-09. Effective 2017-
18, GASB replaced Statement No. 45 to expand OPEB valuation and disclosure
requirements with Statement No. 75. Since Statement No. 75 replaced Statement
No. 45, this report only references Statement 75 despite the valuation and disclosure
requirement under Statement No. 45 beginning in 2008-09.
Statement No. 75's direct impact on agencies subject to the GASB pronouncement is
the requirement to value and disclose implicit subsidies inherent in pooled medical
plans such as CalPERS medical. Implicit subsidies arise when pooled medical plans
charge the same premium regardless of the insured's age or medical history and use
excess premiums collected from some members of the pool to subsidize the
premiums of other members. Under the implicit subsidy valuation, retiree medical
benefits' true value is higher than the premium due to experience studies linking
medical costs to age. Older individuals incur higher medical costs than younger
individuals.
Statement No. 75’s Applicability to Saratoga. Statement No. 75 applies to
Saratoga due to our contract with CalPERS for employee medical under the Public
Employees’ Medical and Hospital Care Act (PEMHCA.) PEMHCA requires contracting
agencies to extend the option of medical insurance to retirees at the same cost for
active employees. PEMHCA further requires employers to pay a minimum monthly
amount toward the retiree’s medical premiums. For 2023, the PEMHCA minimum is
$1,813 Saratoga complies with the PEMHCA requirement and contributes the
minimum monthly amount for 21 retirees. Table 1 briefly summarizes the City's
OPEB.
6
Table 1. Saratoga’s OPEB Summary
Post-employment
Benefits Other than
Pension (OPEB)
• Retiree medical
• No retiree dental, vision, life, or Medicare
reimbursement
Eligibility • Retire directly from Saratoga (age 50 & 5 years
CalPERS service or disability)
• Surviving spouse receives 100% benefit if retiree elects
CalPERS survivor annuity.
Benefit Contribution
(active1 and retired
participants)
City pays PEMHCA minimum monthly:
2022 2023
$149 $151
1 Active employees receive a cafeteria plan contribution from which to purchase insurance while
employed
Saratoga’s Compliance with the Accounting Standard. On review of City
financial records for the close of 2021-22, City staff identified that the City’s financial
statements do not comply with the GASB pronouncement on OPEB valuation and
disclosure. We contracted actuarial firm Foster & Foster to perform the GASB
Statement No. 75 actuarial analysis for inclusion in the June 30, 2023, financial
statements. Foster and Foster have completed their study and will present their
findings to the Finance Committee, Attachment B.
Staff Recommendation. While there is no obligation to fund the OPEB liability, City
staff recommends Finance Committee consider the cost-benefit of a funding policy.
In the meantime, City staff will prepare the June 30, 2023 Annual Comprehensive
Financial Report (ACFR) in full compliance with GASB standards and Generally
Accepted Accounting Principles. We will also work with the City’s independent auditor
to determine the proper corrective actions due to the late implementation of OPEB
accounting standards.
ATTACHMENTS
A. Retiree Healthcare Plan – June 30, 2022 GASBS 75 Accounting Information
B. Retiree Healthcare Plan Slide Presentation
7
City of Saratoga
Retiree Healthcare Plan
June 30, 2022 GASBS 75 Accounting Information
As of Measurement Date June 30, 2021
Based on the June 30, 2022 Actuarial Valuation
Doug Pryor, ASA, EA, MAAA
Braeleen Scott, ASA, MAAA
Kateryna Pryor
Foster & Foster, Inc.
December 15, 2022
Topic Page
GASBS 75 Information
Applicable Dates 1
Note Disclosures 2
Required Supplementary Information 12
Actuarial Certification 14
Supporting Calculations 15
Journal Entries 23
Actuarial Valuation Information
Plan Summary 29
PEMHCA Premiums 31
PEMHCA Sample Claims 33
Data Summary 34
Actuarial Obligations 41
Additional Actuarial Assumptions 43
b:\ca-public\city_of_saratoga\opeb valuation\6.30.2022\gasbs_75\f&f_saratogaci_22-12-15_gasbs75_22-06-30_report_draft.pdf
Contents
8
■ Measurement date
■ Measurement period
■ Actuarial valuation date
Update procedures were used to roll back the Total OPEB Liability
from the valuation date (June 30, 2022) to the measurement date
(June 30, 2021) and to the beginning of the measurement period
(June 30, 2020).
June 30, 2021
July 1, 2020 to
June 30, 2021
June 30, 2022
Fiscal Year Ended
June 30, 2022
Applicable Dates and Periods
Applicable Dates
City of Saratoga
1
GASBS 75 December 15, 2022 (DRAFT)
■ Plan type
■ OPEB trust
■ Special funding situation
■ Nonemployer contributing entities
■ Plan closed to new entrants
Fiscal Year Ended
June 30, 2022
Plan Information
Note Disclosures
Yes
Single Employer
No
No
No
City of Saratoga
2
GASBS 75 December 15, 2022 (DRAFT)
9
■ Inactives currently receiving benefits
■ Inactives entitled to but not yet receiving benefits
■ Active employees
■ Total
Covered participant counts were available to the actuary as of the valuation
date (June 30, 2022), but updated counts were not provided to the actuary
as of the measurement date (June 30, 2021).
Counts do not impact any other information shown in this report.
TBD
TBD
TBD
Covered Participants
Number of
Covered
Participants
TBD
At June 30, 2021, the measurement date, the following numbers of
participants were covered by the benefit terms:
Note Disclosures
City of Saratoga
3
GASBS 75 December 15, 2022 (DRAFT)
■ Total OPEB Liability (TOL)
Note Disclosures
6/30/21 6/30/22
Measurement Date Measurement Date
6/30/20 6/30/21
2,108,403$ 2,260,718$
(2.16%)(2.21%)
Total OPEB Liability
Fiscal Year Ending
City of Saratoga
4
GASBS 75 December 15, 2022 (DRAFT)
10
■
■ Changes for the year
● Service Cost
● Interest
● Changes of benefit terms
● Actual vs. expected experience
● Assumption changes
● Benefit payments*
■ Net Changes
■
*See the measurement period column on page 15 for details.
(6/30/21 measurement date)
Balance at 6/30/22
Note Disclosures
Changes in Total OPEB Liability
Balance at 6/30/21
151,726
2,108,403$
Total OPEB
Liability
-
49,241
2,260,718$
-
(6/30/20 measurement date)
152,315
(64,030)
15,378
City of Saratoga
5
GASBS 75 December 15, 2022 (DRAFT)
■
■ Total OPEB Liability
■
■ Total OPEB Liability
Sensitivity of Total OPEB Liability
1% Decrease
(1.16%)
Current Rate
(2.16%)
1% Increase
(3.16%)
Discount Rate
Note Disclosures
1,946,527$ 2,260,718$ 2,658,922$
Changes in the Discount Rate
Changes in the Healthcare Trend Rate
Healthcare Trend Rate
1% Decrease Current Trend 1% Increase
2,605,848$ 2,260,718$ 1,981,585$
City of Saratoga
6
GASBS 75 December 15, 2022 (DRAFT)
11
■ OPEB Expense/(Income)*
* See page 20 for OPEB expense/(income) detail, which is not a required disclosure.
OPEB Expense/(Income) for Fiscal Year
2021/22
203,255$
Note Disclosures
2020/21
Measurement Period
City of Saratoga
7
GASBS 75 December 15, 2022 (DRAFT)
■
■ Changes in assumptions
■
■ Total
* See page 15 for details.
Deferred Outflows/Inflows Balances at June 30, 2022
Note Disclosures
June 30, 2022
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
-$ -$ Differences between expected and actual
experience
Employer contributions made
subsequent to the measurement date*
85,855 -
13,381 -
72,474 -
City of Saratoga
8
GASBS 75 December 15, 2022 (DRAFT)
12
■ 2023
■ 2024
■ 2025
■ 2026
■ 2027
■ Thereafter
1,997
3,396
1,997
Recognition of Deferred Outflows and Inflows of Resources
Note Disclosures
Deferred
Outflows/(Inflows)
of ResourcesFYE June 30
1,997
in Future OPEB Expense
1,997 $
1,997
City of Saratoga
9
GASBS 75 December 15, 2022 (DRAFT)
■ ■
■ ■
■ ■
■
■ ■
■ ■
■ ■
CalPERS 2000-2019 Experience Study
Significant Actuarial Assumptions Used for Total OPEB Liability
Mortality Improvement Mortality projected fully generational with Scale
MP-2021
Discount Rate 2.16% at June 30, 2021
June 30, 2022Actuarial Valuation Date
Contribution Policy No pre-funding
General Inflation
Mortality, Retirement,
Disability, Termination
2.21% at June 30, 2020
2.50% annually
(Bond Buyer 20-Bond Index)
(Bond Buyer 20-Bond Index)
Actuarial Assumption June 30, 2021 Measurement Date
Note Disclosures
City of Saratoga
10
GASBS 75 December 15, 2022 (DRAFT)
13
■ ■
■
■ ■
■
■ ■
■ ■
■
Significant Actuarial Assumptions Used for Total OPEB Liability
Note Disclosures
Actuarial Assumption June 30, 2021 Measurement Date
Medicare - 7.50% for 2023, decreasing to an
ultimate rate of 3.45% in 2076
Salary Increases Aggregate - 2.75% annually
3.50% annually
Actives - 50%
Merit - CalPERS 2000-2019 Experience Study
Non-Medicare - 8.50% for 2023, decreasing to an
ultimate rate of 3.45% in 2076
Medical Trend
PEMHCA Minimum
Increase
Healthcare Participation
at Retirement Retirees - current election
City of Saratoga
11
GASBS 75 December 15, 2022 (DRAFT)
■ Changes in Total OPEB Liability
● Service Cost
● Interest
● Changes of benefit terms
● Actual vs. expected experience
● Assumption changes
● Benefit payments
■ Net Changes
■ Total OPEB Liability (beginning of year)
■ Total OPEB Liability (end of year)
49,241
-
151,726$
2,260,718
-
2,108,403
15,378
(64,030)
152,315
2021/22
2020/21
Measurement Period
Schedule of Changes in Total OPEB Liability and Related Ratios
Required Supplementary Information
City of Saratoga
12
GASBS 75 December 15, 2022 (DRAFT)
14
■
■
■
* For the 12-month period ended on June 30, 2021 (Measurement Date).
As reported by the City.
Schedule of Changes in Total OPEB Liability and Related Ratios
Required Supplementary Information
2021/22
Covered employee payroll*
Total OPEB Liability as a percentage of
covered employee payroll
Total OPEB Liability 2,260,718$
7,122,272
31.7%
Measurement Date
6/30/21
City of Saratoga
13
GASBS 75 December 15, 2022 (DRAFT)
Foster & Foster, Inc.
December 15, 2022
Doug Pryor, ASA, EA, MAAA
Foster & Foster, Inc.
December 15, 2022
To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted actuarial
principles and practices and complies with applicable Actuarial Standards of Practice. Additionally, in our opinion, actuarial
methods and assumptions comply with GASBS 75, assuming 2021/22 implementation year. As the actuary, we have
recommended the assumptions used in this report, and we believe they are reasonable. As members of the American Academy
of Actuaries meeting the Academy Qualification Standards, we certify the actuarial results and opinions herein.
Respectfully submitted,
This report presents the City of Saratoga Retiree Healthcare Plan 2021/22 disclosure under Governmental Accounting
Standards Board Statement No. 75 (GASBS 75). This report may not be appropriate for other purposes, although it may be
useful to the City for the Plan’s financial management.
This report is based on information provided by the City which we relied on and did not audit. The June 30, 2022 valuation is
based on plan provisions and participant data provided by the City, all of which we relied on and did not audit. We reviewed
the census data for reasonableness.
Future actuarial measurements may differ significantly from the current measurements presented in this report due to such
factors as: plan experience differing from that anticipated by the assumptions; changes in assumptions; changes expected as
part of the natural progression of the plan; and changes in plan provisions or applicable law. Actuarial models necessarily rely
on the use of estimates and are sensitive to changes. Small variations in estimates may lead to significant changes in actuarial
measurements. Due to the limited scope of this assignment, we did not perform an analysis of the potential range of such
measurements.
Actuarial Certification
Braeleen Scott, ASA, MAAA
The Journal Entries in this report are provided for the City's convenience and are not an actuarial communication. Therefore,
this actuarial certification does not apply to the Journal Entries.
City of Saratoga
14
GASBS 75 December 15, 2022 (DRAFT)
15
■
■
■
■
■
Measurement period (7/1/20 to 6/30/21): $64,321
Fiscal year (7/1/21 to 6/30/22): $72,474
Measurement
Period
Measurement
Date to FYE
7/1/20 to
6/30/21
7/1/21 to
6/30/22
Employer Contributions
Supporting Calculations
Cash benefit payments 29,340$ 33,032$
Implied subsidy benefit payments 34,690 39,055
Total benefit payments 64,030 72,087
Administrative expenses 291 387
Total employer contributions 64,321 72,474
City of Saratoga
15
GASBS 75 December 15, 2022 (DRAFT)
*Participants with no liability excluded for the purpose of calculating the average.
6/30/22 641.5 years 83 7.7 years 7.7 years
July 1, 2020 (beginning of the measurement period) was not a valuation date and
no census data was available to the actuary as of that date. Therefore, the average
of the expected remaining service lives was estimated as follows:
Valuation
Date
Total expected
remaining
service lives*
Covered
participants*
Average of the
expected
remaining
service lives as of
valuation date
Average of the
expected
remaining
service lives as of
7/1/20 (not less
than 1 yr)
Average of the Expected Remaining Service Lives
Supporting Calculations
City of Saratoga
16
GASBS 75 December 15, 2022 (DRAFT)
16
- -
Initial
Recog
Period
Amount Recognized in OPEB Expense for FY
21/22 22/23 26/27 27/28+23/24 25/26
-
Differences between Expected and Actual Experience
Recognition of Deferred Outflows/Inflows at June 30, 2022
Supporting Calculations
21/22 - - - -
Fiscal
Year 24/25
-
Total - - - - - - -
Deferred Balances
June 30, 2022
Outflows (Inflows)
- -
- -
Initial Amt
-
City of Saratoga
17
GASBS 75 December 15, 2022 (DRAFT)
Recognition of Deferred Outflows/Inflows at June 30, 2022
Supporting Calculations
1,997 3,396
Changes of Assumptions
1,997
22/23 23/24 24/25 25/26 26/27
Initial
Recog
Period
1,997 1,997
Amount Recognized in OPEB Expense for FY
21/22 27/28+
21/22 7.7 1,997 1,997
Fiscal
Year
Total 1,997 1,997 1,997 1,997 1,997 1,997 3,396
Deferred Balances
June 30, 2022
Outflows (Inflows)
13,381 -
13,381 -
Initial Amt
15,378
City of Saratoga
18
GASBS 75 December 15, 2022 (DRAFT)
17
■
■
■
1,997
22/23 23/24 24/25 25/26
Changes of
Assumptions
Total
27/28+
-
3,396
26/27
-
1,997
1,997 1,997 1,997 1,997 3,396 1,997
1,997
Thereafter
1,997
Recognition of Deferred Outflows/Inflows in Future OPEB Expense
- - - -
Supporting Calculations
1,997
Differences between
Expected and
Actual Experience
City of Saratoga
19
GASBS 75 December 15, 2022 (DRAFT)
■ Service Cost
■ Interest on Total OPEB Liability
■ Administrative expense
■ Changes of benefit terms
■ Recognition of deferred outflows/(inflows)
● Experience
● Assumptions
■ OPEB Expense/(Income)
Components of GASBS 75 OPEB Expense
-
2020/21
Supporting Calculations
203,255
2021/22
151,726$
49,241
1,997
291
-
Measurement Period
City of Saratoga
20
GASBS 75 December 15, 2022 (DRAFT)
18
■
■
■
■
Components of GASBS 75 OPEB Expense
Portion of
Year
Supporting Calculations
Calculation of Interest on Total OPEB Liability
Discount
Rate
Dollar
Amount
2020/21 Measurement Period
Interest
2.21%
(708)
100%
2.21% 100%
46,596$
3,353
49,241
50%2.21%Benefit payments (64,030)
2,108,403$
151,726
Total interest
Total OPEB Liability
Service Cost
City of Saratoga
21
GASBS 75 December 15, 2022 (DRAFT)
■ Total OPEB Liability
■ Fiduciary Net Position
■ Net OPEB Liability
■ Deferred inflows of resources
■ Deferred (outflows) of resources
■ Balance Sheet
Check:
■ Balance Sheet 6/30/21
● OPEB Expense/(Income)
● Employer Contributions*
■ Balance Sheet 6/30/22
* See the measurement period column on page 15 for details.
GASBS 75 Balance Equation
Supporting Calculations
Fiscal Year Ending
6/30/21 6/30/22
Measurement Date Measurement Date
6/30/20 6/30/21
2,247,337
(64,321)
203,255
2,108,403$
2,108,403$ 2,260,718$
- -
2,108,403 2,260,718
- -
- (13,381)
2,108,403 2,247,337
City of Saratoga
22
GASBS 75 December 15, 2022 (DRAFT)
19
■
■
■
■
■
■
Check
-$
(64,321)
72,474 -
-
291 -
Employer Contributions
Journal Entries
The entries below assume cash benefit payments, Trust contributions, and
administrative expenses have been charged to OPEB Expense when paid, and that no
accounting entries have been made for the current year implied subsidy payment,
which is recorded as a reduction to active employee health care costs. See page 15 for
details.
Debit (Credit)
(136,795) 136,795
Active employee health care costs - (implied subsidy payments
7/1/21 to 6/30/22)
OPEB Expense - (for contributions paid 7/1/21 to 6/30/22)-
(39,055)
(33,419)
Net OPEB Liability - (for Contributions paid 7/1/20 to 6/30/21)
OPEB Expense - (for admin fees paid 7/1/20 to 6/30/21)
OPEB Expense - 7/1/20 to 6/30/21 contributions
Deferred Outflow - 7/1/21 to 6/30/22 contributions
64,030$
-
City of Saratoga
23
GASBS 75 December 15, 2022 (DRAFT)
Following records the impact of current year OPEB expense
■ Deferred Outflows*
■ Deferred Inflows**
■ OPEB Expense/Credit ***
■ Net OPEB Liability
Check
*
**
***
Summary Journal Entries - OPEB Expense
Journal Entries
Debit (Credit)
13,381$ -$
- -
202,964 -
- (216,345)
216,345 (216,345)
Total OPEB expense, $203,255, equals $202,964 plus $291 admin fees from page 23.
See page 27 for details.
See page 26 ('Subtotal' row) for details.
City of Saratoga
24
GASBS 75 December 15, 2022 (DRAFT)
20
■
■ Deferral: Changes of assumptions
■ Total deferred outflow/inflow
■ Net OPEB Liability (NOL)
■ Contributions after the Measurement Date
■ Net Impact
Check:
■ Total OPEB expense/(income) for FYE 2022
Journal Entries
13,381 -
- (2,260,718)
Ending Balances at June 30, 2022
Debit (Credit)
-$ -$
Deferral: Differences between expected and actual
experience
13,381 -
- -
2,247,337 -
2,260,718 (2,260,718)
203,255 -
City of Saratoga
25
GASBS 75 December 15, 2022 (DRAFT)
■
■
■
■
■
Journal Entries
Reconciliation of Deferred Outflows
Deferred Outflows
Opening
Balance -
Debit
Journal
Entry -
Debit
Journal
Entry -
(Credit)
Ending
Balance -
Debit
Detail for page 24
Change in assumptions - 13,381 - 13,381
Differences between actual and expected
experience -$ -$ -$ -$
Subtotal - actuarial deferrals - 13,381 - 13,381
72,474 (64,321) 72,474
Total Deferred Outflows 64,321 85,855 (64,321) 85,855
Contributions after the Measurement Date 64,321
City of Saratoga
26
GASBS 75 December 15, 2022 (DRAFT)
21
■
■
■
Journal Entries
Reconciliation of Deferred Inflows
Deferred Inflows
Opening
Balance -
(Credit)
Journal
Entry -
(Credit)
Journal
Entry -
Debit
Ending
Balance -
(Credit)
Detail for page 24
- - -
Differences between actual and expected
experience -$ -$ -$ -$
Change in assumptions - - - -
Total Deferred (Inflows) -
City of Saratoga
27
GASBS 75 December 15, 2022 (DRAFT)
■ Total OPEB (Liability)
■ Fiduciary Net Position
■ Net OPEB (Liability)
■ Deferred (inflows) of resources
■ Deferred outflows of resources
■ Balance Sheet Impact
Deferred Outflows include contributions after the measurement date.
Reconciliation of Deferred Outflows/(Inflows)
Journal Entries
Summary of Balances
Fiscal Year Ended
6/30/21 6/30/22
Measurement Date Measurement Date
6/30/20 6/30/21
(2,108,403)$ (2,260,718)$
64,321 85,855
(2,044,082) (2,174,863)
- -
(2,108,403) (2,260,718)
- -
City of Saratoga
28
GASBS 75 December 15, 2022 (DRAFT)
22
Plan Summary
Eligibility Service or disability retirement directly from the City under
CalPERS (age 501 with 5 years of service for employees)
Retiree Medical
Benefit City contributes monthly the PEMHCA minimum benefit for
retirees ($149.00 in 2022, $151.00 in 2023)
The retiree pays the remainder of the premium for the
healthcare plan elected in CalPERS
City pays CalPERS administrative fee (0.25% of total premium
for 2021/22)
Surviving
Spouse Benefit
Available to surviving spouses of retirees who elect CalPERS
survivorship benefits
Implied
Subsidy
Employer cost for allowing retirees to participate at active rates
Dental, Vision
& Life
None
1 Age 52 for Miscellaneous PEPRA employees.
City of Saratoga
29
Actuarial Valuation December 15, 2022 (DRAFT)
■
● General trend:
● Sample active age 40, retire age 60:
■GASB defers to Actuarial Standards of Practice.
■
●
●
Implied Subsidy
Plan Summary
Requires implied subsidy valued for community rated plans such as PEMHCA.
Effective with all valuations on or after March 31, 2015.
For PEMHCA, employer cost for allowing retirees to participate at active rates.
Premiums PEMHCA Cost of
$600 Active
$1,200
$500 Active
$700 Retiree
In May 2014, Actuarial Standards Board released revised Actuarial Standards of
Practice (ASOP) No. 6:
$600 Retiree
25 30 35 40 45 50 55 60 64
Blended Premium 600 600 600 600 600 600 600 600 600
Cost by Age 400 420 460 500 550 600 640 700 800
$300
$400
$500
$600
$700
$800
City of Saratoga
30
Actuarial Valuation December 15, 2022 (DRAFT)
23
Anthem Select
Anthem Traditional
Blue Shield Access+
Blue Shield Trio
Health Net SmartCare
Kaiser
UnitedHealthcare Alliance
UnitedHealthcare Group
UnitedHealthcare Edge
Western Health Advantage
Anthem EPO Del Norte
PERS Platinum
PERS Gold
Premiums
Actuarial Valuation Information
2022 PEMHCA Monthly Premiums
Region 1
Plan Non-Medicare Eligible Medicare Eligible
Single 2-Party Family Single 2-Party
1,080.57
Family
$ 1,015.81 $ 2,031.62 $ 2,641.11 $ 360.19 $ 720.38 $ 1,080.57
1,304.00 2,608.00 3,390.40 360.19 720.38
1,059.33
1,116.01 2,232.02 2,901.63 353.11 706.22 1,059.33
898.54 1,797.08 2,336.20 353.11 706.22
907.59
1,153.00 2,306.00 2,997.80 n/a n/a n/a
857.06 1,714.12 2,228.36 302.53 605.06
883.95
1,020.28 2,040.56 2,652.73 n/a n/a n/a
n/a n/a n/a 294.65 589.30
1,041.63
741.26 1,482.52 1,927.28 314.94 629.88 944.82
n/a n/a n/a 347.21 694.42
n/a 1,057.01 2,114.02 2,748.23 n/a n/a
1,057.01
701.23
2,114.02
1,402.46
2,748.23
1,823.20
381.94
377.41
763.88
754.82
1,145.82
1,132.23
City of Saratoga
31
Actuarial Valuation December 15, 2022 (DRAFT)
Anthem Select
Anthem Traditional
Blue Shield Access+
Blue Shield Trio
Health Net SmartCare
Kaiser
UnitedHealthcare Alliance
UnitedHealthcare MA
UnitedHealthcare MA Edge
Western Health Advantage
Anthem EPO Del Norte
PERS Platinum
PERS Gold 1,178.13
1,200.12 2,400.24 3,120.31 420.02 840.04 1,260.06
825.61 1,651.22 2,146.59 392.71 785.42
n/a
760.17 1,520.34 1,976.44 331.11 662.22 993.33
1,200.12 2,400.24 3,120.31 n/a n/a
1,073.10
n/a n/a n/a 299.68 599.36 899.04
n/a n/a n/a 357.70 715.40
n/a
913.74 1,827.48 2,375.72 283.25 566.50 849.75
1,044.07 2,088.14 2,714.58 n/a n/a
$ 2,934.96
n/a
888.94 1,777.88 2,311.24 361.90 723.80 1,085.70
1,174.50 2,349.00 3,053.70 n/a n/a
1,085.70
1,210.71 2,421.42 3,147.85 413.59 827.18 1,240.77
1,035.21 2,070.42 2,691.55 361.90 723.80
$ 413.59 $ 827.18
2023 PEMHCA Monthly Premiums
Region 1
Plan Non-Medicare Eligible Medicare Eligible
Single 2-Party Family Single 2-Party Family
$ 1,240.77 $ 1,128.83 $ 2,257.66
Premiums
Actuarial Valuation Information
City of Saratoga
32
Actuarial Valuation December 15, 2022 (DRAFT)
24
■■
■■
Age
$804
832
896
1,138
1,387
1,674
938
1,191
1,453
1,753
$705
728
785
996
1,215
1,966
1,235
1,505
1,817
Age
55
60
65
1,665
Health Net
SmartCare
903
25
35
45 972
$873
F
Anthem Select
903
972
518
718
1,188
1,607
MF
$842
871
$423
495
MF
537
745
1,231
Anthem
Traditional
1,665
2,133
60 1,522 1,369 1,321 1,187
65 1,960 1,659 1,706 1,440
738
55 1,106 1,111 953
1,235
1,506
958
35 460 796 386 680
45 649 862 550
M F
25 $391 $768 $326 $655
1,721
PPO
Medical
Claims
Costs 2023
Sample estimated monthly claims costs
Region 1 – Non-Medicare Eligible
PERS Gold
MF
2,133 2,0591,817
PERS Platinum
1,466
993 1,134
1,344 1,535
686
537
744 601
434
1,231
$459 $371
M
$459 $443
MF
$873
F
Region 1 – Non-Medicare Eligible
PEMHCA Sample Claims
HMO
Medical
Claims
Costs 2023
Sample estimated monthly claims costs
M
UnitedHealthcare
AllianceKaiser
City of Saratoga
33
Actuarial Valuation December 15, 2022 (DRAFT)
6/30/22
■ Actives
● Counts 62
● Average
» Age 49.9
» City Service 11.1
» CalPERS Service 14.5
■ Retirees (Benefiting Only)
● Counts 21
● Average
» Age 72.4
» Retirement Age* 61.7
* Excludes survivors.
Participant Statistics
Actuarial Valuation Information
City of Saratoga
34
Actuarial Valuation December 15, 2022 (DRAFT)
25
Active Medical Coverage
Anthem Select - - 2 - 2
June 30, 2022
Medical Plan Single 2-Party Family Waived Total
- -
Actuarial Valuation Information
1
34
Health Net SmartCare - 1 - - 1
Kaiser 13 7 14 -
Anthem Traditional - 1
6
PERS Gold - 1 1 - 2
PERS Platinum 1 2 3 -
62
Waived - - - 16 16
Total 14 12 20 16
City of Saratoga
35
Actuarial Valuation December 15, 2022 (DRAFT)
Active Medical Coverage by Age Group
Actuarial Valuation Information
June 30, 2022
Age Single 2-Party Family Waived Total
7
Under 30 1 - - - 1
30-34 4 - 1 2
2
35-39 3 - 1 5 9
40-44 - - 2 -
16 62
11
45-49 - 2 5 1 8
50-54 2 1 5 3
9
55-59 2 3 6 2 13
60-64 2 4 - 3
49.9 Average Age
65+ - 2 - - 2
Total
44.1 58.4 50.4 48.0
14 12 20
City of Saratoga
36
Actuarial Valuation December 15, 2022 (DRAFT)
26
Total 8 13 11 8 10 9 3 62
65+ - - - 1 1 - - 2
4 3 13
60-64 - 2 2 1 2 2
55-59 - 4 - 1 1
- 9
50-54 1 1 2 1 5 1 - 11
45-49 3 - 1 2 - 2 - 8
- - 9
40-44 - 1 1 - - -
35-39 3 2 1 2 1
- 2
30-34 1 3 3 - - - - 7
25-29 - - 1 - - - - 1
Under 25 - - - - - - - -
Age <1 1-4 5-9 10-14 15-19 20-24 25+ Total
Actuarial Valuation Information
Active Age Service Distribution
June 30, 2022
City Service
City of Saratoga
37
Actuarial Valuation December 15, 2022 (DRAFT)
Retiree Medical Coverage by Age Group
Actuarial Valuation Information
June 30, 2022
Age Single 2-Party Family Waived Total
1
Under 50 - - - - -
50-54 - - - 1
8
55-59 - - - 1 1
60-64 2 4 1 1
6
65-69 4 1 - 4 9
70-74 1 1 - 4
2
75-79 2 - - 4 6
80-84 - - - 2
42
Over 85 4 1 - 4 9
Total 13 7 1 21
City of Saratoga
38
Actuarial Valuation December 15, 2022 (DRAFT)
27
Waived
10
- - - 3 3
Total 2 4 1 3
2
1 PERS Gold - 1 - -
PERS Platinum 1 1 - -
Total
Retiree Medical Coverage
Under Age 65
June 30, 2022
Kaiser 1 2 1 - 4
Medical Plan Single 2-Party Family Waived
Actuarial Valuation Information
City of Saratoga
39
Actuarial Valuation December 15, 2022 (DRAFT)
Waived
32
UnitedHealthcare 1 1 - - 2
Total 11 3 - 18
PERS Platinum 4 2 - - 6
- - - 18 18
Kaiser 5 - - - 5
Actuarial Valuation Information
Anthem Select 1 - - - 1
Medical Plan Single 2-Party Family Waived Total
Retiree Medical Coverage
Age 65 & Over
June 30, 2022
City of Saratoga
40
Actuarial Valuation December 15, 2022 (DRAFT)
28
■
● Actives
● Retirees
● Total
■
● Actives
● Retirees
● Total
■
■
3.54% Discount Rate
June 30, 2022
Actuarial Obligations
Actuarial Valuation Information
Present Value of Benefits
Cash
Subsidy
Implied
Subsidy Total
1,382,661$ 933,577$ 2,316,238$
Actuarial Accrued Liability
717,391 193,831 911,222
2,100,052 1,127,408 3,227,460
655,565 439,036 1,094,601
717,391 193,831 911,222
1,372,956 632,867 2,005,823
(Projected 2022/23)
74,809 47,023 121,832
(2022/23)
39,045 46,165 85,210
Service Cost
Pay-As-You-Go Cost
City of Saratoga
41
Actuarial Valuation December 15, 2022 (DRAFT)
2032 159,270 87,731 71,539
2024
2025
2026
2027
2029
2028
63,689 72,499 136,188
67,617 83,166 150,783
2030
2031
48,231 58,975 107,206
51,958 70,743 122,701
56,038 59,034 115,072
59,830 76,633 136,463
41,520 55,369 96,889
44,715 48,396 93,111
June 30, 2022
Cash
Subsidy
Implied
Subsidy Total
39,045$ 46,165$ 85,210$
Fiscal Year
Ended
2023
Projected Benefit Payments
Actuarial Valuation Information
City of Saratoga
42
Actuarial Valuation December 15, 2022 (DRAFT)
29
■ ■
■ ■
■ ■
■
■ ■
Actuarial Assumption
Waived Retiree Re-
election
None
Actuarial Valuation Information
Additional Actuarial Assumptions
June 30, 2022
Medicare Eligibility All participants assumed to be Medicare eligible
and elect Medicare plans at age 65
Surviving Spouse
Participation
100% if eligible
Actives: Males 3 years older than females
Retirees: Males 3 years older than females if
spouse birth date not available
Spouse Age
City of Saratoga
43
Actuarial Valuation December 15, 2022 (DRAFT)
■ ■
■ ■ Data Quality Our valuation used census data provided by the
City and CalPERS OPEB data extract. We
reviewed the data for reasonableness and resolved
any questions with the City. We believe the
resulting data can be relied on for all purposes of
this valuation.
June 30, 2022
Actuarial Assumption
Actuarial Modeling Our valuation was performed using and relying on
ProVal, an actuarial model leased from WinTech.
Our use of ProVal is consistent with its intended
purpose. We have reviewed and understand
ProVal and its operation, sensitivities and
dependencies
Additional Actuarial Assumptions
Actuarial Valuation Information
City of Saratoga
44
Actuarial Valuation December 15, 2022 (DRAFT)
30
■ ■
■
■
■
■
■
■
CalPERS 2000-2019 experience study was used
Actuarial Valuation Information
Additional Actuarial Assumptions
Actuarial Assumption
Basis for Assumptions No experience study performed for this Plan
June 30, 2022
Medical coverage and participation based in part on
Plan experience
Mortality improvement is a Society of Actuaries table
Inflation based on our estimate for the Plan’s long time
horizon
Age-based claims costs were developed by Axene
Health Partners based on demographic data provided by
CalPERS, Axene’s proprietary AHP Cost Model, and
Society of Actuaries studies.
Medical trends were based on expectations over the
short term blended into long term medical trends
developed using the Society of Actuaries Getzen Model
of Long-Run Medical Cost Trends.
City of Saratoga
45
Actuarial Valuation December 15, 2022 (DRAFT)
This page intentionally blank
Actuarial Valuation Information
City of Saratoga
46
Actuarial Valuation December 15, 2022 (DRAFT)
31
City of Saratoga
Retiree Healthcare Plan
June 30, 2022 Actuarial Valuation
June 30, 2023 GASBS 75 Disclosure
Doug Pryor, Senior Consulting Actuary
Foster & Foster,Inc.
March 7,2023
32
VALUATION SUMMARY
Benefits
Eligibility •Retire directly from City under CalPERS
(age 50 & 5 years CalPERS service1 or disability)
Medical •City pays PEMHCA minimum monthly:
2022 2023
$149 $151
Surviving
Spouse
•100% of retiree benefit continues to surviving spouse if retiree
elects CalPERS survivor annuity
Other •No dental, vision, life, Medicare reimbursement
•Implicit rate subsidy included
1
March 7, 2023 DRAFT 1
52 for Miscellaneous PEPRA members.
33
VALUATION SUMMARY
Implied Subsidy
Cost for allowing retirees to participate at active rates.
General trend:
$300 25 30 35 40 45 50 55 60 64
Blended Premium 600 600 600 600 600 600 600 600 600
Cost by Age 400 420 460 500 550 600 640 700 800
March 7, 2023 DRAFT 2
$400
$500
$600
$700
$800
34
VALUATION SUMMARY
March 7, 2023 DRAFT 3
Premiums
2023 PEMHCA Monthly Premiums (Region 1)
Plan Non-Medicare Eligible Medicare Eligible
Single 2-Party Family Single 2-Party Family
Anthem Select $1,128.83 $2,257.66 $2,934.96 $413.59 $827.18 $1,240.77
Anthem Traditional 1,210.71 2,421.42 3,147.85 413.59 827.18 1,240.77
Blue Shield Access+1,035.21 2,070.42 2,691.55 361.90 723.80 1,085.70
Blue Shield Trio 888.94 1,777.88 2,311.24 361.90 723.80 1,085.70
Health Net SmartCare 1,174.50 2,349.00 3,053.70 n/a n/a n/a
Kaiser 913.74 1,827.48 2,375.72 283.25 566.50 849.75
UnitedHealthcare Alliance 1,044.07 2,088.14 2,714.58 n/a n/a n/a
UnitedHealthcare MA n/a n/a n/a 299.68 599.36 899.04
UnitedHealthcare MA Edge n/a n/a n/a 357.70 715.40 1,073.10
Western Health Advantage 760.17 1,520.34 1,976.44 331.11 662.22 993.33
Anthem EPO Del Norte 1,200.12 2,400.24 3,120.31 n/a n/a n/a
PERS Platinum 1,200.12 2,400.24 3,120.31 420.02 840.04 1,260.06
PERS Gold 825.61 1,651.22 2,146.59 392.71 785.42 1,178.13
35
VALUATION SUMMARY
March 7, 2023 DRAFT 4
Participant Statistics
6/30/22
■Actives
●Counts
●Average
»Age
» City Service
» CalPERS Service
62
49.9
11.1
14.5
■Retirees (Benefiting Only)
●Counts
●Average
»Age
» Retirement Age*
21
72.4
61.7
36
VALUATION SUMMARY
March 7, 2023 DRAFT 5
Actuarial Assumptions
Assumption June 30, 2022 Valuation
■Discount Rate ■3.54% at June 30,2022
(Bond Buyer 20-Bond Index)
■2.16% at June 30, 2021
(Bond Buyer 20-Bond Index)
■Medical Trend ■Non-Medicare -8.50% for 2023, decreasing to an
ultimate rate of 3.45% in 2076
■Medicare -7.50% for 2023, decreasing to an
ultimate rate of 3.45% in 2076
■PEMHCA Minimum
Increase
■3.50%annually
■Healthcare Participation
at Retirement
■Actives -50%
■Retirees -current election
37
VALUATION SUMMARY
Historical Muni Bond Rates
March 7, 2023 DRAFT 6 38
VALUATION SUMMARY
March 7, 2023 DRAFT 7
Projected Benefit Payments
Fiscal Year
Ended
Cash
Subsidy
Implied
Subsidy Total
2023 $39,045 $46,165 $85,210
2024 41,520 55,369 96,889
2025 44,715 48,396 93,111
2026 48,231 58,975 107,206
2027 51,958 70,743 122,701
2028 56,038 59,034 115,072
2029 59,830 76,633 136,463
2030 63,689 72,499 136,188
2031 67,617 83,166 150,783
2032 71,539 87,731 159,270
39
VALUATION SUMMARY
March 7, 2023 DRAFT 8
Actuarial Obligations
June 30,2022
2.16% Discount Rate
Cash
Subsidy
Implied
Subsidy Total
■Present Value of Benefits
●Actives
●Retirees
$1,382,661
717,391
$933,577
193,831
$2,316,238
911,222
●Total 2,100,052 1,127,408 3,227,460■Actuarial Accrued Liability
●Actives
●Retirees
655,565
717,391
439,036
193,831
1,094,601
911,222
●Total 1,372,956 632,867 2,005,823■Service Cost
(2022/23)
74,809 47,023 121,832
40
GASBS 75
March 7, 2023 DRAFT 9
Applicable Dates and Periods
Fiscal Year Ended
June 30,2023
■Measurement date June 30,2022
■Measurement period July 1, 2021 to
June 30,2022
■Actuarial valuation date June 30,2022
41
GASBS 75
March 7, 2023 DRAFT 10
Footnote Disclosure
Changes in Total OPEB Liability
Total OPEB
Liability
■Balance at 6/30/22(6/30/21 measurement date)$2,260,718
■Changes for the year
●Service Cost 157,573
●Interest 51,457
●Changes of benefit terms -
●Actual vs. expected experience -
●Assumption changes (391,838)
●Benefit payments*(72,087)
■Net Changes (254,895)
■Balance at 6/30/23
(6/30/22 measurement date)
$2,005,823
42
GASBS 75
March 7, 2023 DRAFT 11
Footnote Disclosure
Sensitivity of Total OPEB Liability
■Changes in the Discount Rate
Discount Rate
1%Decrease
(2.54%)
Current Rate
(3.54%)
1%Increase
(4.54%)
■Total OPEB Liability $2,278,428 $2,005,823 $1,782,043
■Changes in the Healthcare Trend Rate
Healthcare Trend Rate
1%Decrease Current Trend 1%Increase
■Total OPEB Liability $1,740,776 $2,005,823 $2,337,252
43
GASBS 75
March 7, 2023 DRAFT 12
OPEB Expense/(Income) for Fiscal Year
2022/23
Measurement Period
2021/22
■Service Cost $157,573
■Interest on Total OPEB Liability 51,457
■Administrative expense 387
■Changes of benefit terms -
■Recognition of deferred outflows/(inflows)
●Experience -
●Assumptions (50,888)
■OPEB Expense/(Income)158,529
44
GASBS 75
March 7, 2023 DRAFT 13
Employer Contributions
Measurement
Period
7/1/21 to
6/30/22
■Cash benefit payments $33,032
■Implied subsidy benefit payments 39,055
■Total benefit payments 72,087
■Administrative expenses 387
■Total employer contributions 72,474
45
GASBS 75
March 7, 2023 DRAFT 14
GASBS 75 Balance Equation
■Balance Sheet 6/30/22 $2,260,718
●OPEB Expense/(Income)158,529
●Employer Contributions*(72,474)
■Balance Sheet 6/30/23 2,346,773
46
GASBS 75
March 7, 2023 DRAFT 15
GASBS 75 Balance Equation
Fiscal Year Ending
6/30/22 6/30/23
Measurement Date
6/30/21
Measurement Date
6/30/22
■Total OPEB Liability $2,260,718 $2,005,823
■Fiduciary Net Position --
■Net OPEB Liability 2,260,718 2,005,823
■Deferred inflows of resources -340,950
■Deferred (outflows) of resources --
■Balance Sheet 2,260,718 2,346,773
47
QUESTIONS?
March 7, 2023 DRAFT 16 48
DATE: March 7, 2023
TO: Finance Committee
FROM: Nick Pegueros, Administrative Services Director
SUBJECT: Draft Report of Cost of Services (User Fee) Study
Saratoga contracted Matrix Consulting to conduct a Comprehensive Cost of Services
Study to document the full cost of fee-based services provided to the community.
The study results offer a defensible analysis for City Council to set user fees at a rate
up to the full cost of provided services in compliance with the California Constitution.
Attachment A transmits an updated draft report on user fees.
The Finance Committee received a high-level overview of the study from Matrix at
the February 7 meeting. Attachment A includes the analysis requested by the
Committee for the impacts of full cost recovery at the line-item fee level. The draft
report also includes fee surveys for several other fees. The Committee also requested
a “final bill” for building permits on a new home, comparing current fees at the 80%,
90%, and 100% cost recovery level and including fees charged by external agencies.
City staff is collecting the requested information for external agencies and will provide
those results in a presentation.
ATTACHMENT
A. Draft Report on Cost of Services (User Fee) Study
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Report on Cost of Services (User Fee) Study
CITY OF SARATOGA, CALIFORNIA
DRAFT REPORT
January 2023
50
Table of Contents
1. Introduction and Executive Summary 1
2. Legal Framework and Policy Considerations 4
3. User Fee Study Methodology 7
4. Results Overview 9
5. Building 10
6. Code Compliance 14
7. Engineering 17
8. Finance & Administrative Services 19
9. Planning 21
10. Development Services Surcharges 25
11. Cost Recovery Considerations 29
Appendix – Comparative Survey 34
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1. Introduction and Executive Summary
The draft report, which follows, presents the results of the Cost of Services (User Fee)
Study conducted by the Matrix Consulting Group for the City of Saratoga, California.
1 Project Background and Overview
The City of Saratoga last conducted a formal fee study over 10 years ago, in 2006. The
purpose of this study is to evaluate and determine the full cost (direct and indirect) of
providing a variety of city services. The Matrix Consulting Group analyzed the cost-of-
service relationships that exist between fees for service activities in the following areas:
Building, Code Compliance, Engineering, Finance, and Planning. The results of this Study
provide a tool for understanding current service levels and the cost for those services.
2 General Project Approach and Methodology
The methodology employed by the Matrix Consulting Group is a widely accepted “bottom
up” approach to cost analysis, where time spent per unit of fee activity is determined for
each position within a Department or Program. Once time spent for a fee activity is
determined, all applicable City costs are then considered in the calculation of the “full”
cost of providing each service. The following table provides an overview of types of costs
applied in establishing the “full” cost of services provided by the City:
Table 1: Overview of Cost Components
Cost Component Description
Direct
Fiscal Year 2023 Budgeted salaries and allowable expenditures.
Indirect
Program, departmental, clerical, and Citywide support.
Together, the cost components in the table above comprise the calculation of the total
“full” cost of providing any service, regardless of whether a fee for that service is charged.
The work accomplished by the Matrix Consulting Group in the analysis of the proposed
fees for service involved the following steps:
• Department / Program Staff Interviews: The project team interviewed department
/ program staff regarding their needs for clarification to the structure of existing
fee items, or for addition of new fee items.
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• Data Collection: Data was collected for each permit / service, including time
estimates. In addition, all budgeted costs and staffing levels for Fiscal Year 2023
were entered into the Matrix Consulting Group’s analytical software model.
• Cost Analysis: The full cost of providing each service included in the analysis was
established.
• Review and Approval of Results with City Staff: Department management has
reviewed and approved these documented results.
A more detailed description of user fee methodology, as well as legal and policy
considerations are provided in subsequent chapters of this report.
3 Summary of Results
When comparing FY23 fee-related budgeted expenditures with fee-related revenue the
City is under-recovering its costs by approximately $897,000 and recovering 76% of its
costs. The following table shows by major service area / discipline, the revenue collected,
the total annual cost, the resulting difference, and associated cost recovery percentage.
Table 2: Annual Cost Recovery Analysis
Service Area
Total
Revenue
Total
Annual Cost Difference
Cost
Recovery %
Building $1,415,635 $1,918,480 ($502,845) 74%
Code Compliance $8,135 $10,376 ($2,241) 78%
Engineering $863,966 $901,677 ($37,712) 96%
Finance $20,675 $43,490 ($22,815) 48%
Planning $571,140 $902,278 ($331,138) 63%
TOTAL $2,879,551 $3,776,302 ($896,751) 76%
The departments / divisions listed above are all are facing under-recoveries. The City’s
largest under-recovery is related to the Building Division at $502,845, followed by
Planning at $331,138. Overall, Building and Planning’s deficits highlight the disparity
between the current fees charged and the actual cost of providing the service. Therefore,
the City should closely evaluate these service areas and increase fees where appropriate
to help bridge this gap.
The detailed documentation of the Study will show an over-collection for some fees (on
a per unit basis), and an undercharge for most others. The results of this analysis will
provide the Department and the City with guidance on how to right-size their fees to
ensure that each service unit is set at an amount that does not exceed the full cost of
providing that service.
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The display of the cost recovery figures shown in this report are meant to provide a basis
for policy development discussions among Council members and City staff, and do not
represent a recommendation for where or how the Council should act. The setting of the
“rate” or “price” for services, whether at 100 percent full cost recovery or lower, is a policy
decision to be made only by the Council, with input from City staff and the community.
4 Considerations for Cost Recovery Policy and Updates
The Matrix Consulting Group recommends that the City use the information contained in
this report to discuss, adopt, and implement a formal Cost Recovery Policy, including a
mechanism for the annual update of fees for service.
1 Adopt a Formal Cost Recovery Policy
The Matrix Consulting Group strongly recommends that the Council adopt a formalized,
individual cost recovery policy for each service area included in this Study. Whenever a
cost recovery policy is established at less than 100% of the full cost of providing services,
a known gap in funding is recognized and may then potentially be recovered through other
revenue sources. The Matrix Consulting Group considers a formalized cost recovery
policy for various fees for service an industry Best Management Practice.
2 Adopt an Annual Fee Update / Increase Mechanism
The purpose of a comprehensive update is to completely revisit the analytical structure,
service level estimates and assumptions, and to account for any major shifts in cost
components or organizational structures that have occurred since the City’s previous
analysis. It’s recommended the City adopts the practice of conducting comprehensive
analyses every three to five years as this practice captures any changes to organizational
structures, processes, or any new service areas.
In between comprehensive updates, the City should utilize published industry economic
factors such as Consumer Price Index (CPI) or other regional factors to update the cost
calculations established in the Study on an annual basis. Alternatively, the City could also
consider the use of its own anticipated labor cost increases such as step increases,
benefit enhancements, or cost of living raises. Utilizing an annual increase mechanism
would ensure that the City receives appropriate fee increases that reflect growth in costs.
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2. Legal Framework and Policy Considerations
This section of the report is intended to provide an overview regarding overall legal rules
and regulations as well as general policy considerations for fees for service. A “user fee”
is a charge for service provided by a governmental agency to a public citizen or group. In
California, several constitutional laws such as Propositions 13, 4, and 218, State
Government Codes 66014 and 66016, and more recently Prop 26 and the Attorney
General’s Opinion 92-506 set the parameters under which the user fees typically
administered by local government are established and administered. Specifically,
California State Law, Government Code 66014(a), stipulates that user fees charged by
local agencies “…may not exceed the estimated reasonable cost of providing the service
for which the fee is charged”.
1 General Principles and Philosophies Regarding User Fees
Local governments are providers of many types of general services to their communities.
While all services provided by local government are beneficial to constituents, some
services can be classified as globally beneficial to all citizens, while others provide more
of a direct benefit to a specific group or individual. The following table provides examples
of services provided by local government within a continuum of the degree of community
benefit received:
Table 3: Services in Relation to Benefit Received
“Global” Community Benefit “Global” Benefit and an
Individual or Group Benefit Individual or Group Benefit
• Police
• Park Maintenance
• Fire Suppression
• Recreation / Community
Services
• Fire Prevention
• Building Permits
• Planning and Zoning Approval
• Site Plan Review
• Engineering Development
Review
• Facility Rentals
Funding for local government is obtained from a myriad of revenue sources such as
taxes, fines, grants, special charges, user fees, etc. In recent years, alternative tax
revenues, which typically offset subsidies for services provided to the community, have
become increasingly limited. These limitations have caused increased attention on user
fee activities as a revenue source that can offset costs otherwise subsidized (usually) by
the general fund. In Table 3, services in the “global benefit” section tend to be funded
primarily through voter approved tax revenues. In the middle of the table, one typically
finds a mixture of taxes, user fee, and other funding sources. Finally, in the “individual /
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group benefit” section of the table, lie the services provided by local government that are
typically funded almost entirely by user fee revenue.
The following are two central concepts regarding the establishment of user fees:
• Fees should be assessed according to the degree of individual or private benefit
gained from services. For example, the processing and approval of a land use or
building permit will generally result in monetary gain to the applicant, whereas
Police services and Fire Suppression are examples of services that are essential
to the safety of the community at large.
• A profit-making objective should not be included in the assessment of user fees.
In fact, California laws require that the charges for service be in direct proportion
to the costs associated with providing those services. Once a charge for service is
assessed at a level higher than the actual cost of providing a service, the term
“user fee” no longer applies. The charge then becomes a tax subject to voter
approval.
Therefore, it is commonly accepted that user fees are established at a level that will
recover up to, and not more than, the cost of providing a particular service.
2 General Policy Considerations Regarding User Fees
Undoubtedly, there are programs, circumstances, and services that justify a subsidy from
a tax based or alternative revenue source. However, it is essential that jurisdictions
prioritize the use of revenue sources for the provision of services based on the continuum
of benefit received.
Within the services that are typically funded by user fees, the Matrix Consulting Group
recognizes several reasons why City staff or the Council may not advocate the full cost
recovery of services. The following factors are key policy considerations in setting fees
at less than 100 percent of cost recovery:
• Limitations posed by an external agency. The State or an outside agency will
occasionally set a maximum, minimum, or limit the jurisdiction’s ability to charge
a fee at all. An example includes time spent copying and retrieving public
documents and / or transportation permits.
• Encouragement of desired behaviors. Keeping fees for certain services below full
cost recovery may provide better compliance from the community. For example, if
the cost of a permit for changing a water heater in residential home is higher than
the cost of the water heater itself, many citizens will avoid pulling the permit.
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• Benefit received by user of the service and the community at large is mutual.
Many services that directly benefit a group or individual equally benefit the whole
community. Examples include Planning Design Review, historical dedications, and
certain types of special events.
The Matrix Consulting Group recognizes the need for policies that intentionally subsidize
certain activities. The primary goals of a User Fee Study are to provide a fair and equitable
basis for determining the costs of providing services and ensure that the City complies
with State law.
3 Summary of Legal Restrictions and Policy Considerations
Once the full cost of providing services is known, the next step is to determine the “rate”
or “price” for services at a level which is up to, and not more than the full cost amount.
The Council is responsible for this decision, which often becomes a question of balancing
service levels and funding sources. The placement of a service or activity within the
continuum of benefit received may require extensive discussion and at times fall into a
“grey area”. However, with the resulting cost of services information from a User Fee
Study, the Council can be assured that the adopted fee for service is reasonable, fair, and
legal. The City will need to review all fees for service in this analysis and where subsidies
are identified increase them to reduce the deficit, and where over-recoveries are identified
the fee must be reduced to comply with the law.
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3. User Fee Study Methodology
The Matrix Consulting Group utilizes a cost allocation methodology commonly known
and accepted as the “bottom-up” approach to establishing User Fees. The term means
that several cost components are calculated for each fee or service. These components
then build upon each other to comprise the total cost for providing the service. The
following chart describes the components of a full cost calculation:
The general steps utilized by the project team to determine allocations of cost
components to a particular fee or service are:
• Calculate fully burdened hourly rates by position, including direct & indirect costs.
• Develop time estimates for the average time spent to deliver each service included
in the study.
• Distribute the appropriate amount of other cost components to each fee or service
based on the staff time allocation basis, or another reasonable basis.
The results of these allocations provide detailed documentation for the reasonable
determination of the actual cost of providing each service.
One of the key study assumptions utilized in the “bottom up” approach is the use of time
estimate averages for the provision of each fee related service. Utilization of time
estimates is a reasonable and defensible approach, especially since experienced staff
members who understand service levels and processes unique to the City developed
these estimates.
The project team worked closely with City staff in developing time estimates with the
following criteria:
• Estimates are representative of average times for providing services. Extremely
difficult or abnormally simple projects are not factored in the analysis.
DIRECT
(Salaries, Benefits,
Productive Hours)
INDIRECT
(Departmental Admin,
Services & Supplies,
Citywide Overhead etc.)
Total Cost
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• Estimates reflect the time associated with the position or positions that typically
perform a service.
• Estimates provided by staff are reviewed and approved by the department /
division, and often involve multiple iterations before a Study is finalized.
• Estimates are reviewed by the project team for “reasonableness” against their
experience with other agencies.
• Estimates were not based on time in motion studies, as they are not practical for
the scope of services and time frame for this project.
• Estimates match the current or proposed staffing levels to ensure there is no over-
allocation of staff resources to fee and non-fee related activities.
The Matrix Consulting Group agrees that while the use of time estimates is not perfect, it
is the best alternative available for setting a standard level of service for which to base a
jurisdiction’s fees for service and meets the requirements of California law.
The alternative to time estimating is actual time tracking, often referred to billing on a
“time and materials” basis. Except in the case of anomalous or sometimes very large and
complex projects, the Matrix Consulting Group believes this approach to not be cost
effective or reasonable for the following reasons:
• Accuracy in time tracking is compromised by the additional administrative burden
required to track, bill, and collect for services in this manner.
• Additional costs are associated with administrative staff’s billing, refunding, and
monitoring deposit accounts.
• Customers often prefer to know the fees for services in advance of applying for
permits or participating in programs.
• Departments can better predict revenue streams and staff needs using
standardized time estimates and anticipated permit volumes.
Situations arise where the size and complexity of a given project warrants time tracking
and billing on a “time and materials” basis. The Matrix Consulting Group has
recommended taking a deposit and charging Actual Costs for such fees as appropriate
and itemized within the current fee schedule.
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4. Results Overview
The motivation behind a cost of services (User Fee) analysis is for the City Council and
Departmental staff to maintain services at a level that is both accepted and effective for
the community, and to maintain control over the policy and management of these
services.
It should be noted that the results presented in this report are not a precise measurement.
In general, a cost-of-service analysis takes a “snapshot in time”, where a fiscal year of
financial and operational information is utilized. Changes to the structure of fee names,
along with the use of time estimates allow only for a reasonable projection of subsidies
and revenue. Consequently, the Council and Department staff should rely conservatively
upon these estimates to gauge the impact of implementation going forward.
Discussion of results in the following chapters is intended as a summary of extensive and
voluminous cost allocation documentation produced during the Study. Each chapter will
include detailed cost calculation results for each major permit category including the
following:
• Modifications: discussions regarding any proposed revisions to the current fee
schedule, including elimination or addition of fees.
• “Per Unit” Results: comparison of the full cost of providing each unit of service to
the current fee for each unit of service (where applicable).
• Annualized Results: utilizing volume of activity estimates annual subsidies and
revenue impacts were projected.
The full analytical results were provided to City staff under separate cover from this
summary report.
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5. Building
The Building Division is responsible for reviewing building proposals and construction for
adherence to state and local codes and laws. The fees examined within this study relate
to review and inspections of residential and commercial buildings, photovoltaic
installations, grading, mechanical, electrical, and plumbing improvements. The following
subsections discuss fee schedule modifications, detailed per unit results, and projected
annual revenue impacts for the fee-related services provided by Building.
1 Fee Schedule Modifications
In discussions with Building staff, the following fee schedule modifications were
proposed:
• Removed Fees: The following Energy Calculation Review fees were removed as
these are now standard reviews for all plans and accounted for in the Building
Permit and Plan Review fees:
- New Non-Residential Structure
- New Residential Structure
- Addition to Non-Residential Building
- Addition to Residential Building
- Application for Moving Permits
• Expansion of Valuation Based Fees: The City’s current Building Permit Fee
valuation table ranges stop at a high of $1,000,000. However, it was determined
that this amount is too low and does not accurately calculate fees for high-cost
projects. As such, two additional ranges were added: $5,000,000 and $10,000,000.
This table expansion will account for much larger cost projects that do not actually
take an exponential increase in the amount of time to plan review and inspect.
• New Fees: A ‘Re-check Plan Review’ fee was added to help account for significant
additional plan review of projects. This fee would be applied only when a project
has exceeded the estimated hours accounted for in a base permit or plan review
fee.
The modifications noted above ensure that the proposed fee schedule more accurately
reflects the services being provided by the Building Division.
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2 Detailed Results
The Building Division collects fees for building permits, commercial and residential
photovoltaic, grading, re-roofs, retaining walls, landslide repairs, mechanical heating and
air conditioning, electrical, plumbing, and building inspections. The total cost calculated
for each service includes direct staff costs and departmental and citywide overhead. The
following table details the fee name, current fee, total cost, and difference associated
with each service offered.
Table 4: Total Cost Per Unit Results – Building
Fee Name Current Fee Total Cost Difference
Building Permits Fees
Valuation
$1 to $2,000 $78 $162.45 ($84)
$2,001 base fee $78 $162.45 ($84)
Each additional $1,000 up to $25,000 $17.50 $16.48 $1
$25,001 base fee $490 $541.48 ($51)
Each additional $1,000 up to $50,000 $12.60 $21.66 ($9)
$50,001 base fee $805 $1,082.97 ($278)
Each additional $1,000 up to $100,000 $9.80 $10.83 ($1)
$100,001 base fee $1,242 $1,624.45 ($382)
Each additional $1,000 up to $500,000 $7 $9.21 ($2)
$500,001 base fee $4,042 $5,306.55 ($1,265)
Each additional $1,000 up to $1,000,000 $5.90 $10.18 ($4)
$1,000,001 base fee $7,010 $10,396.50 ($3,387)
Each additional $1,000 up to $5,000,000 $4.56 $3.90 $1
$5,000,001 base fee $25,250.00 $25,991.26 ($741)
Each additional $1,000 up to $10,000,000 $4.56 $2.60 $2
$10,000,001 base fee $48,050.00 $38,986.89 $9,063
Each additional $1,000 $4.56 $1.30 $3
Plan Check Fee 65% 66% -1%
Photovoltaic
Residential Roof Mount Actual Costs
15KW and above $15 $20 ($5)
Ground Mount Actual Costs
Commercial
0-8 KW $690 $612 $78
9-48 KW $925 $769 $156
49 KW and above $2,260 $1,763 $497
Grading Permits
Less than 100 Cubic Yards $510 $524 ($14)
Over 100 Cubic Yards Base $510 $524 ($14)
Each additional 100 Cubic Yards $125 $217 ($92)
Plan Check Fee $545 $582 ($37)
Other Valuations
Demolition Actual Costs
Reroofs - Residential Actual Costs
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Fee Name Current Fee Total Cost Difference
Landslide Repair Permit At discretion of Building Official
Retaining Walls
Masonry / Concrete $165 $395 ($230)
Wood $85 $297 ($212)
MEP Permits
Mechanical Permits - Heating and Air Conditioning Permits
Minor Remodels, Residential/Commercial without
associated building permit $0.10 $0.18 ($0.08)
Major Remodels, Residential/Commercial without
associated building permit Actual Costs
Miscellaneous permits without associated building
permit Actual Costs
Plan Check Fee 25% 86% -61%
Electrical Permits
Minor Remodels, Residential/Commercial without
associated building permit $0.10 $0.18 ($0.08)
Major Remodels, Residential/Commercial without
associated building permit Actual Costs
Miscellaneous permits without associated building
permit Actual Costs
Plan Check Fee 25% 85% -60%
Plumbing Permits
Water Heater Replacement $80 $199 ($119)
Minor Remodels, Residential/Commercial without
associated building permit $0.10 $0.18 ($0.08)
Major Remodels, Residential/Commercial without
associated building permit Actual Costs
Miscellaneous permits without associated building
permit Actual Costs
Plan Check Fee 25% 85% -60%
Building Inspection Services
Other Inspection Fees Inspection Outside of Normal Business Hours Actual Costs
Re-Inspection Fees Assessed Under
Section 305(h) of the Uniform Administrative Code Actual Costs
Inspections or plan review for which no fee is
specifically indicated Actual Costs
Permit Extension – prior to expiration Actual Costs
Permit to Final (only if all inspections
except final have been completed) Actual Costs
Alternative Materials or Methods of Construction
Request Actual Costs
Duplicate Permit Card Actual Costs
Stockpiling Permit $310 $325 ($15)
Re-check Plan Review New $196
Generally, Building fees are under-recovering with the largest under-recovery found in
‘Building Permits Valuation - $1,000,001 Base Fee’ at $3,387. The largest over-recovery is
in “Photovoltaic – Commercial – 49 KW and above” at $497.
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3 Annual Revenue Impacts
Based on prior year workload information (FY21-22) the Building Division has a deficit of
approximately $500,000. The following table shows by major fee category the revenue at
current fee, the total projected annual cost, and the resulting difference:
Table 5: Annual Revenue Impacts – Building
Fee Name
Revenue at
Current Fee Annual Cost Difference
Valuation $1,368,755 $1,832,517 ($463,763)
Photovoltaic $5,520 $7,292 ($1,772)
Grading Permits $2,895 $4,297 ($1,402)
Other Valuations $85 $297 ($212)
Mechanical Permits $12,547 $22,081 ($9,534)
Electrical Permits $7,688 $13,738 ($6,050)
Plumbing Permits $18,145 $38,257 ($20,112)
TOTAL $1,415,635 $1,918,480 ($502,845)
The Building Division has a 74% annual cost recovery, which reflects a $502,845 deficit.
The largest component of the deficit is valuation fees, which experiences a deficit of
$463,763, followed by plumbing permits which have a deficit of $20,112. This analysis
indicates that right-sizing the valuation permits based upon the new proposed system as
well as plumbing permits will have a significant impact on the Division’s ability to recover
its costs.
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6. Code Compliance
The Code Compliance Division is responsible for ensuring compliance and overseeing
enforcement of municipal codes and state laws. The fees examined within this study
relate to animal permits, noise exemption, special events, code violation citations, sign
retrieval, abandoned vehicles, and business regulation permits. The following
subsections discuss fee schedule modifications, detailed per unit results, and projected
annual revenue impacts for the fee-related services provided by Code Compliance.
1 Fee Schedule Modifications
In discussions with Code Compliance staff, the following fee schedule modifications
were proposed:
• Removed Fees: The ‘Off-street Vehicle Permit’ fee was removed as Code
Compliance staff no longer issues these permits.
• Consolidated Fees: The following fees appeared more than once in the City’s
master fee schedule and were consolidated to clarify the true fee charged for
these services:
- Special Event permit
- Noise Exemption permit
The modifications noted above ensure that the proposed fee schedule more accurately
reflects the services being provided by Code Compliance. Furthermore, it is
recommended that all Business Regulation Permits be moved to the Code Compliance
section of the master fee schedule to better identify who provides those services.
2 Detailed Results
The Code Compliance Division collects fees for animal permits, noise exemption, special
events, code violation citations, sign retrieval, abandoned vehicles, and business
regulation permits. The total cost calculated for each service includes direct staff costs
and departmental and citywide overhead. The following table details the fee name,
current fee, total cost, and difference associated with each service offered.
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Table 6: Total Cost Per Unit Results – Code Compliance
Fee Name Current Fee Total Cost Difference
Code Compliance Permits
Animal – Kennel Permit $130 $345 ($215)
Animal – Horse Permit $130 $345 ($215)
Noise Exception Permit $55 $86 ($31)
Enforcement Fees & Penalties
Administrative Citation Fee
First Violation $105 $250 ($145)
Second Violation $205 $500 ($295)
Subsequent Violations $510 $1,000 ($490)
Administrative Citation Late Payment Penalty
Within 30 days after due date 10% 10% 0%
Exceeding 30 days after due date 10% 10% 0%
Notice of Code Violation
Removal of Notice of Code Violation $510 $518 ($8)
Sign Retrieval Fees (per calendar year)
First Occurrence N / A $259 N / A
Second Occurrence $25 $259 ($234)
Subsequent Occurrences $45 $259 ($214)
Sign Abandonment Actual Costs
Sheriff Office Enforcement Fees
Abandoned Vehicle Fee $255 $255 $0
Administrative
General Fees
Subpoena Summons Response Actual Cost $777 N / A
Appeals - Public Hearings
Code Compliance Appeal $410 $1,036 ($626)
Business Licenses
Business Regulation Permits
Bingo
Permit Application Fee $50 $130 ($80)
Circus and Carnivals (Fairs)
Permit Application Fee $100 $173 ($73)
Clean Up Deposit $500 $500 $0
Firearms
Sellers Permit Application Fee $300 $518 ($218)
Sellers Permit Renewal Fee $250 $259 ($9)
Massage Establishments Permit Application Fee $750 $518 $232
Permit for Managing Employee $350 $359 ($9)
Permit for Massage Practitioner $350 $259 $91
Examination Fee As set by the Examiner
Background Investigation / Fingerprinting As set by the Sheriff
Appeal Hearing - Permit Denial $500 $691 ($191)
Appeal Hearing - Permit Suspension or Revocation $1,500 $1,036 $464
Motion Picture Filming
Permit Application Fee $500 $345 $155
Clean-up At discretion of Community Events Official
Special Event
Permit Application Fee $300 $345 ($45)
Clean Up Deposit $250 $250 $0
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Most fees charged by Code Compliance are under-recovering, with the largest under-
recovery being ‘Appeals – Public Hearings – Code Compliance Appeal’ at $626. The
largest over-recovery is within the Massage Establishments section, ‘Appeal Hearing –
Permit Suspension or Revocation’ at $464.
3 Annual Revenue Impacts
Based on prior year workload information (FY21-22) the Code Compliance Division has a
deficit of approximately $2,000. The following table shows by major fee category the
revenue at current fee, the total projected annual cost, and the resulting difference:
Table 7: Annual Revenue Impacts – Code Compliance
Fee Name
Revenue at
Current Fee Annual Cost Difference
Code Compliance Permits $2,475 $3,886 ($1,411)
Admin Fees $410 $1,813 ($626)
Business Regulation Permits $5,250 $4,677 $573
TOTAL $8,135 $10,376 ($2,241)
The Code Compliance Division has a 78% annual cost recovery, which reflects a $2,241
subsidy. The largest component of the subsidy is Code Compliance Permits, including
noise exception permits, which have the highest workload of all code compliance fees
and experience a deficit of $1,411. Administrative fees also show an annual subsidy of
$626. Conversely, business regulation permits show a surplus of $573. Updating these
fees based upon the new proposed system will enable the Division to recover its costs
fairly and equitably for code compliance permits, administrative fees, and business
regulation permits.
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7. Engineering
The Engineering Division is responsible for ensuring private development projects are
constructed in accordance with City guidelines and standards, through the reviewing of
engineering plans and specifications. The fees examined within this study relate to review
and inspections of right-of-way repairs and improvements, subdivisions, and heavy
equipment rentals. The following subsections discuss fee schedule modifications,
detailed per unit results, and projected annual revenue impacts for the fee-related
services provided by Engineering.
1 Fee Schedule Modifications
In discussions with Engineering staff, two minor fee schedule modifications were
proposed, including adding ‘Oversized Load Permit’ to the fee schedule, and renaming the
‘First $50,000 Estimated Construction Cost’ Improvement Plan Check fee to be a base fee
rather than a minimum charge. These modifications ensure that the proposed fee
schedule more accurately reflects the services being provided by the Engineering
Division.
2 Detailed Results
The Engineering Division collects fees for improvement plan checks, review and
inspections of subdivisions, encroachments, major repairs or capital improvements,
equipment rentals, tree and bench dedications, and public works map & plan checks or
inspection services. The total cost calculated for each service includes direct staff costs
and departmental and citywide overhead. The following table details the fee name,
current fee, total cost, and difference associated with each service offered.
Table 8: Total Cost Per Unit Results – Engineering
Fee Name Current Fee Total Cost Difference
Engineering Fees
Engineering Design & Administrative Review $1,020 $1,129 ($109)
Improvement Plan Check Service Fee
First 50,000 Estimated Construction Cost base fee $5,100 $7,589 ($2,489)
Over 50,000 Estimated Construction Cost 5% 2.11% 3%
Inspection Fees For Subdivisions & Building Site
Improvements 200% 119% 81%
Tentative Subdivision Map, 1 lot $2,550 $3,641 ($1,091)
Each Additional Lot $500 $579 ($79)
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Fee Name Current Fee Total Cost Difference
Engineering Permits
Encroachment Permits
Permit Application Fee for pipes, drains, conduits,
utility service connections, routine O&M work by utility
agencies, and permanent encroachments. $510 $1,190 ($680)
Major Repairs or Capital Improvements by Utility Agencies / Companies
Up to $250,000 14% 9.73% $0
Between $250,000 and $500,000 $35,700 $24,324 $11,376
Engineer's Estimate over $250,000 8% 17.87% ($0)
Over $500,000 $56,100 $89,367 ($33,267)
Engineer's Estimate over $500,000 7% 2.94% $0
Oversized Load Permit $25 $524 ($499)
Equipment Rentals
Heavy Equipment, Vehicles, and Construction Tools &
Equipment Rentals Actual Cost
Security Deposit To be determined by Fleet Manager
Miscellaneous
Tree and Bench Dedications 50% Actual Cost
Additional Public Works map checks, plan checks, or
inspection services Actual Cost
Generally, Engineering fees are under-recovering. The largest under-recovery relates to
‘Major Repairs or Capital Improvements by Utility Agencies / Companies – Over $500,000’
at $33,267. The largest over-recovery relates to ‘Major Repairs or Capital Improvements
by Utility Agencies / Companies – Between $250,000 and $500,000 at $11,376.
3 Annual Revenue Impacts
Based on prior year workload information (FY21-22) the Engineering Division has a
subsidy of approximately $38,000. The following table shows by major fee category the
revenue at current fee, the total projected annual cost, and the resulting difference:
Table 9: Annual Revenue Impacts – Engineering
Fee Name
Revenue at
Current Fee Annual Cost Difference
Encroachment Permits $140,760 $328,363 ($187,603)
Major Repairs or Capital Improvements by Utility Agency $723,206 $573,314 $149,892
TOTAL $863,966 $901,677 ($37,712)
The Engineering Division has a 96% annual cost recovery, which reflects a $37,712
subsidy. Encroachment permits are the source of this subsidy, with a total deficit of
$187,603, which is partially balanced by the Major Repairs or Capital Improvements by
Utility Agency annual surplus of $149,892. By re-considering fees within both categories
to represent cost of service more accurately, the subsidy could be eliminated.
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8. Finance & Administrative Services
The Finance & Administrative Services Department is responsible for overseeing and
supporting the City’s financial, administrative, and technology related operations. The
fees-related services examined within this study relate to business licensing. The
following subsections discuss fee schedule modifications, detailed per unit results, and
projected annual revenue impacts for the fee-related services provided by the Finance &
Administrative Services Department.
1 Fee Schedule Modifications
In discussions with Finance staff, the following fee schedule modifications were
proposed to the current fee schedule:
• Removed Fees: The following fees should be moved from Finance’s section of the
fee schedule to an alternative department / division’s section as they are not
processed by Finance staff.
- Business Regulation Permits were moved from the Finance fee schedule to
the Code Compliance fee schedule as these services are performed by Code
Compliance Staff.
- Notary Fees were moved from the Finance fee schedule to the Clerk / General
Administration fee schedule as these services are only provided by Clerk staff.
• Combined Fees: The ‘Duplicate certificate’ fee was combined with the ‘Address
change or correction’ fee to make a singular fee called ‘Address change or
correction / Duplicate Certificate.’
The modifications noted above ensure that the proposed fee schedule more accurately
reflects the services being provided by Finance staff.
2 Detailed Results
The Finance & Administrative Services Department collects fees for business licensing.
The total cost calculated for each service includes direct staff costs and departmental
and citywide overhead. The following table details the fee name, current fee, total cost,
and difference associated with each service offered.
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Table 10: Total Cost Per Unit Results – Finance
Fee Name Current Fee Total Cost Difference
Business Licenses
Processing Fees (Non-Refundable)
a. New application $35 $49 ($14)
b. Application renewal $20 $49 ($29)
c. Address change or correction $15 $24 ($9)
e. Business license listing $35 $32 $3
Overall, Finance experiences an under-recovery for every fee charged except for ‘Business
license listing,’ which over-recovers by $3. The largest under-recovery is ‘Application
renewal’ at $29.
3 Annual Revenue Impacts
Based on prior year workload information (FY21-22) the Finance Department has a deficit
of approximately $23,000. The following table shows by fee category, the revenue at
current fee, the total projected annual cost, and the resulting difference:
Table 11: Annual Revenue Impacts – Finance
Fee Name
Revenue at
Current Fee Annual Cost Difference
Business Licenses
Processing Fees (Non-Refundable)
a. New application $6,475.00 $9,025.11 ($2,550)
b. Application renewal $14,080.00 $34,344.21 ($20,264)
c. Address change or correction $15.00 $24.39 ($9)
e. Business license listing $105.00 $96.59 $8
TOTAL $20,675 $43,490 ($22,815)
The Finance & Administrative Services Department has a 48% annual cost recovery, which
reflects a $22,815 subsidy. The largest component of the subsidy is from application
renewals, which experiences a $20,264 deficit. This indicates that a significant portion of
the subsidy would be eliminated by adjusting the application renewal fee to more
accurately reflect staff time spent on this service.
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9. Planning
The Planning Division is responsible for ensuring development applications comply with
zoning regulations and ordinances. Additionally, they are responsible for long-range
planning activities to inform policy decisions related to the growth and development of
the City. The fees examined within this study relate to appeals, annexation, technical
review, general plan services, conditional use, environmental impact reporting, among
others. The following subsections discuss fee schedule modifications, detailed per unit
results, and projected annual revenue impacts for the fee-related services provided by
Planning.
1 Fee Schedule Modifications
In discussions with Planning staff, the following fee schedule modifications were
proposed to the current fee schedule:
• Removed Fees: The following fees were removed as the Planning Division no
longer provides these services:
- Construction Trailer Permit
- Satellite Dish Antenna Permit
- Storage Permit
- Landscape Bond Acceptance Fee
- Request for Continuance
- Project Notification Sign
- Planning Process Orientation Class
- Fence Enclosure – Application Review
• Re-named Fees: The following three fees were changed to better reflect services
offered by the City:
- ‘Plan Submittal Orientation’, re-named as ‘Pre-Application Review’
- ‘Base Fee, Less than 10 lots’, re-named as ‘Base Fee, 4 or less lots’
- ‘Each additional lot over 10’, re-named as ‘Over 4 lots’
• New Fees: The following fees were added to account for newer services offered
by the City:
- After-the-fact Tree Removal Permit (More than 3 trees)
- SB9: Urban Lot Split
- SB9: Two Unit Development
- Over the Counter (OTC): Minor (e.g., AC Units)
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- Over the Counter (OTC): Major (e.g., Swimming Pool, Gazebo, etc.)
- Outside vendor Surcharge
The modifications noted above ensure that the proposed fee schedule will more
accurately reflect the services being provided by the Planning Division.
2 Detailed Results
The Planning Division collects fees for appeals, annexation, technical review, general plan
services, conditional use, environmental impact reporting, among others. The total cost
calculated for each service includes direct staff costs and Departmental and Citywide
overhead. The following table details the fee name, current fee, total cost, and difference
associated with each service offered.
Table 12: Total Cost Per Unit Results – Planning
Fee Name Current Fee Total Cost Difference
Planning Permits
Tree Removal Permit
Tree Removal Permit $130 $321 ($191)
After-the-Fact Tree Removal Permit (Up to 3 trees) $415 $568 ($153)
After-the-Fact Tree Removal Permit (More than 3
trees) Actual Cost
Planning Fees
Appeals
Appeal of Administrative Decision to Planning
Commission per City Code Section 15-90.010 $410 $2,476 ($2,066)
From Planning Commission to City Council per City
Code Section 15-90.020 $615 $2,476 ($1,861)
Application Extension Fee $2,550 $1,340 $1,210
Planning Services
Annexation
Annexation Request $5,000 $5,000 $0
Waiver Request $510 $486 $24
City Attorney Services Actual Costs
Noticing Services (Mailing List) Actual Costs
Final Planning Inspections $170 $239 ($69)
Technical Review
Application (up to 3 reviews) $510 $1,032 ($522)
Re-Review $208 ($208)
Special Reports and Studies Actual Cost
Traffic and Economic Studies/Other Special Reviews Actual Costs
Williamson Act Contract Application or Contract
Cancellation $5,000 $5,000 $0
Zoning Ordinance Amendment $3,500 $3,500 $0
Complex Project Fee Actual Costs
General Plan Services
General Plan Amendment $3,500 $3,500 $0
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Fee Name Current Fee Total Cost Difference
Pre-Development Application Services
Pre-Application Review New $416 ($416)
Property Profile $105 $208 ($103)
Planning Application Reviews
Conditional Use Permit
Administrative Review $3,470 $2,801 $669
Planning Commission Review $4,490 $9,498 ($5,008)
Design Application Review
Administrative Review $3,470 $5,246 ($1,776)
Planning Commission Review $5,305 $9,221 ($3,916)
Environmental Application Review
Department of Fish & Game EIR Fee per AB 3158 Actual Costs
Department of Fish & Game Negative Declaration Fee Actual Costs
Environmental Assessment Fee $1,500 $1,500 $0
Mitigated Negative Declaration Fee Actual Costs
Environmental Impact Report Administrative Fee Actual Costs
Monitoring of Mitigation Measures Actual Costs
Exception – Application & Permit
Planning Commission Review $1,840 $2,448 ($608)
Heritage Preservation Application & Reviews
Mills Act Application Actual Costs
Historic Compliance Review $245 $1,041 ($796)
Application for Designation No Charge $1,319
Permit Application Fee No Charge $416
Appeal Fee No Charge $2,476
Lot Adjustment – Application Review
Application for Lot Line Adjustment $1,530 $2,392 ($862)
Application for Merger of Parcel $1,530 $2,392 ($862)
Application for Reversion to Acreage $1,530 $2,392 ($862)
Modification of Approved Application Review $2,550 $2,318 $232
Sign – Application Review
Administrative Review $310 $662 ($352)
Planning Commission Review $1,840 $2,261 ($421)
Sound Wall Application Review $1,020 $662 $358
Temporary Use Application Review
Administrative Review $435 $555 ($120)
Planning Commission Review $2,655 $3,010 ($355)
Tentative Map Subdivision – Application Review
Base Fee, 4 or less lots Actual Costs $4,697 N / A
Each additional over 4 lots $150 $7,725 ($7,575)
Subdivision Final Map $5,000 $10,198 ($5,198)
Variance – Application Review $2,755 $3,069 ($314)
Water Efficiency Landscape – Application Review $2,500 $2,500 $0
Arborist Services
Arborist Consultant Services/ Field Inspections Actual Costs
Arborist Review Fee $1,000 $1,500 ($500)
Arborist Review of Tree Appeal $255 $2,568 ($2,313)
Tree Fines Penalty
Outside vendor Surcharge
SB9
Urban Lot Split New $4,047 N / A
Two Unit Development New $5,246 N / A
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Fee Name Current Fee Total Cost Difference
Over the Counter (OTC)
Minor (e.g., AC Units) New $104 N / A
Major (e.g., Swimming Pool, Gazebo, etc.) New $1,249 N / A
Other Services
Certificate of Compliance $2,500 $2,500 $0
Geotechnical Review $5,000 $5,000 $0
Lot Line Adjustment Engineering Fees $2,500 $2,500 $0
Map Checking Fees $2,500 $2,500 $0
Traffic Review Fee $2,500 $2,500 $0
Stormwater Design Review Fee $2,500 $2,500 $0
City Surveyor $2,500 $2,500 $0
Vendor Surcharge New 25% N / A
Generally, Planning fees are under-recovering. The largest under-recovery relates to
‘Tentative Map Subdivision – Application Review - Each additional lot over 4’ for $7,575.
The largest over-recovery is the Planning Appeal Application Extension Fee for $1,210.
3 Annual Revenue Impacts
Based on prior year workload information (FY21-22) the Planning Division has a deficit of
approximately $331,000. The following table shows by major fee category, the revenue
at current fee, the total projected annual cost, and the resulting difference:
Table 13: Annual Revenue Impacts – Planning
Fee Name
Revenue at
Current Fee Annual Cost Difference
Planning Permits $45,370 $112,191 ($66,821)
Planning Services $71,400 $144,422 ($73,022)
Planning Application Reviews $292,870 $459,665 ($166,795)
Arborist Services $49,000 $73,500 ($24,500)
Other Services $112,500 $112,500 $0
TOTAL $571,140 $902,278 ($331,138)
The Planning Division has a cost recovery of approximately 63%, reflecting a subsidy of
$331,138. Each of the major fee categories show an under-recovery except for “Other
Services,” which recovers at-cost. The largest subsidy is found in Planning Application
reviews at $166,795, followed by planning service at $73,022. Planning permits,
specifically in the tree removal category, experience the highest workload and show a
subsidy of $66,821. Updating these fees based on the cost of service would help reduce
subsidy in the Planning Division.
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10. Development Services Surcharges
There are two typical surcharges assessed as part of the development review process –
General Plan Maintenance Fee and Technology fee. The City of Saratoga currently
charges a General Plan Maintenance fee as part of the building phase and a Software
Technology Fee during both the Planning and Building phase. The following subsections
discuss the calculation of the General Plan Maintenance and Software Technology Fees.
1 General Plan Update Fee
The City of Saratoga currently assesses a General Plan Maintenance Fee as part of its
building process. The fee is meant to account for updates to the general plan, zoning
ordinance, housing elements, and other long-range planning activities that are part of the
larger General Plan. This is a typical fee charged by many jurisdictions. The City of
Saratoga currently charges this fee as a percentage of building valuation.
The General Plan Maintenance fee is governed by Government Code Section 66014(b)
which states that fees “may include the costs reasonably necessary to prepare and revise
the plans and policies that a local agency is required to adopt before it can make any
necessary findings and recommendations.” This code states that fees can be charged
against zoning changes, zoning variances, use permits, building inspections, and filing
applications.
More typically, the fee is charged during the building permit phase to ensure any
development project, which gets to the building phase, makes enough of an impact to
require the need for an update to the Zoning Code or the General Plan. This fee should
only be applied to major building permits (i.e., new or remodel / tenant improvements)
rather than standalone permits for water heaters or electrical outlets.
The project team used budget information for Saratoga’s Advanced Planning Division to
determine the annual city cost associated with long-range planning. In addition to this
budgeted cost, the project team used citywide overhead calculated through the Full Cost
Allocation Plan to determine the fully burdened cost associated with Advanced Planning.
The following table shows the total annual costs identified in the Advanced Planning
Budget, Citywide Overhead, and the resulting fully burdened cost of Advanced Planning.
Table 14: General Plan Maintenance Fee Cost Components
Cost Category Total Annual Cost
Advanced Planning Budget $207,376
Citywide Overhead $138,940
TOTAL $346,316
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The total annual costs associated with Advanced Planning Plan are approximately
$346,000. To assess this fee as a percentage of building project valuation, the project
team took the annual cost associated with Advanced Planning and divided it by the total
building valuation for FY22. The following table shows this calculation:
Table 15: General Plan Maintenance Fee Calculation
Category Amount
Total General Plan Annual Maintenance Cost $346,316
Total FY22 Building Valuation $113,255,672
General Plan Maintenance Fee .306%
As the table indicates, the calculated General Plan Maintenance Fee is .306% of building
valuation. The following table compares the city’s current fee to the full cost fee
calculated through this study:
Table 16: General Plan Maintenance Fee Per Unit Result Comparison
Category Current Fee Full Cost Surplus / (Deficit)
General Plan Maintenance Fee .285% .306% (.021%)
The City’s current fee is .285% of the building valuation. While the full cost fee would
result in an increase of the City’s current fee from .285% to .306%. For example, if a project
is valued at $100,000, the current General Plan Maintenance Fee would be $285 while the
full cost would be $306.
As part of this analysis, the project team conducted a comparative survey of other local
jurisdictions and their assessment of the General Plan Maintenance Fee. Like other
comparative efforts, the survey below simply shows the fees charged by the jurisdiction
and does not include the basis upon which the other jurisdictions calculated or developed
their fee. The following table shows the results of this comparative analysis:
Table 17: General Plan Maintenance Fee – Comparative Survey
Jurisdiction Fee Amount
Campbell 8% of building permit fee
Cupertino $0.22 – $0.45 per square foot
Los Altos N / A
Los Altos Hills $239 flat fee
Los Gatos 0.5% building valuation1
Palo Alto 0.112% of building valuation
1 Los Gatos also charges the general plan maintenance fee based on 10% of zoning change and subdivision fees.
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Five of the six surveyed jurisdictions charge a General Plan Maintenance Fee. The way
the fee is charged varies based upon percentage of valuation (Los Gatos, Palo Alto),
percentage of permit fees (Campbell), per square foot (Cupertino), and per permit (Los
Altos Hills). Of those cities that charge the fee as a percentage of building valuation, the
City of Saratoga’s current fee of .285% is the highest. Updating the City’s General Plan
Maintenance fee will allow Saratoga to better recover for its long-range planning efforts.
2 Technology Surcharge Fee
The City currently collects a Software Technology Planning Permit fee of 7.25% which is
applied only to Planning permit fees and a Software Technology Building Permit fee of
$20 per application. A Software Technology Fee allows the City to support the costs
associated with the City’s permitting system, staff time for managing the systems,
acquiring the system, mobile devices used for permitting, etc. The project team used the
City’s IT and GIS related costs for all development-related activities to determine annual
technology costs. The following table shows by cost category the resulting annual cost:
Table 18: Technology Surcharge Fee Cost Components
Cost Category Planning Building Engineering
Total Annual
Cost
IT Service – IS Charge $103,704 $49,383 $39,506 $192,593
GIS System Services -LYNX $16,250 $16,500 $32,750
IT Equipment – IS Charges $9,000 $9,000 $7,500 $25,500
GIS License Support - ESRI $8,200 $33,420 $6,250 $47,870
TOTAL $298,713
Based upon the items needed to provide development-related software technology
services, the annual software technology-related costs are approximately $299,000 for
the City of Saratoga. The project team determined that the most relatable nexus for the
Software Technology Fee is proportionate to the permit fee. This means, the greater the
permit fee, the greater the Software Technology Fee as there is more software utilization
and storage space for larger projects. Therefore, the project team took the total Software
Technology Annual Cost and divided it by the annual fee-related cost associated with
Building, Planning, and Engineering. The following table shows this calculation:
Table 19: Technology Fee Calculation
Category Amount
Total Technology Annual Costs $298,713
Total Projected Development Annual Cost $1,587,002
Technology Fee as % of Permit Fee 19%
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Based upon this calculation, the City’s Technology fee would be 19% of the permit fee.
Therefore, if a planning application fee is $1,000 then the current Software Technology
fee would be $72.50, while the full cost fee would be $190. Similarly, if a building
application fee is $1,000 then the current Software Technology fee would be $20 while
the full cost fee would be $190. With these scenarios in mind, the percentage-based
structure clearly enables the Software Technology fee to be more proportionately
distributed based upon the projects and their impact upon the system.
As part of this analysis, the project team conducted a comparative survey of other local
jurisdictions and their assessment of a Technology Fee. Like other comparative efforts,
the survey below simply shows the fees charged by the jurisdiction and does not include
the basis upon which the other jurisdictions calculated or developed their fee. The
following table shows the results of this comparative analysis:
Table 20: Technology Fee – Comparative Survey
Jurisdiction Fee Amount
Campbell 2% of building permit fee
Cupertino N / A
Los Altos 8% of building/MEP permits
Los Altos Hills N / A
Los Gatos 4% of development application fee
Palo Alto N / A
Half of the surveyed jurisdictions charge a Technology fee and of these jurisdictions, all
charge their technology fee as a percentage of the permit fee. Saratoga’s calculated full
cost of 19% of the permit fee is higher than all other surveyed jurisdictions. Updating the
City’s software technology fee will allow Saratoga to fund the current costs for its
development-related permitting needs.
3 Surcharge Funds
It is a best practice to collect and account for General Plan Maintenance and Technology
surcharges in separate accounts. Prior to implementation, the City should ensure that a
separate fund or subaccount is designated to house the General Plan Maintenance
Surcharge and an additional fund or subaccount to house the Technology Surcharge. This
will ensure compliance with funding requirements, enable appropriate allocation of funds
to general plan or technology-related activities, and mitigate any potential issues with
comingling of funds.
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11. Cost Recovery Considerations
The following sections provide guidance regarding how and where to increase fees,
determining annual update factors, and developing cost recovery policies and
procedures.
1 Fee Adjustments
This study has documented and outlined on a fee-by-fee basis where the City is under
and over collecting for its fee-related services. City and Department management will
now need to review the results of the study and adjust fees in accordance with
Departmental and City philosophies and policies. The following dot points outline the
major options the City has in adjusting its fees.
• Over-Collection: Upon review of the fees that were shown to be over-collecting for
costs of services provided, the City should reduce the current fee to be in line with
the full cost of providing the service.
• Full Cost Recovery: For fees that show an under-collection for costs of services
provided, the City may decide to increase the fee to full cost recovery immediately.
• Phased Increase: For fees with significantly low cost recovery levels, or which
would have a significant impact on the community, the City could choose to
increase fees gradually over a set period of time.
The City will need to review the results of the fee study and associated cost recovery
levels and determine how best to adjust fees. While decisions regarding fees that
currently show an over-recovery are generally straight forward, the following subsections,
provide further detail on why and how the City should consider either implementing Full
Cost Recovery or a Phased Increase approach to adjusting its fees.
1 Full Cost Recovery
Based on the permit or review type, the City may wish to increase the fee to cover the full
cost of providing services. Certain permits may be close to cost recovery already, and an
increase to full cost may not be significant. Other permits may have a more significant
increase associated with full cost recovery.
Increasing fees associated with permits and services that are already close to full cost
recovery can potentially bring a Department’s overall cost recovery level higher. Often,
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these minimal increases can provide necessary revenue to counterbalance fees which
are unable to be increased.
The City should consider increasing fees for permits for which services are rarely
engaged to full cost recovery. These services often require specific expertise and can
involve more complex research and review due to their infrequent nature. As such, setting
these fees at full cost recovery will ensure that when the permit or review is requested,
the City is recovering the full cost of its services.
2 Phased Increases
Depending on current cost recovery levels some current fees may need to be increased
significantly to comply with established or proposed cost recovery policies. Due to the
type of permit or review, or the amount by which a fee needs to be increased, it may be
best for the City to use a phased approach to reaching their cost recovery goals.
As an example, you may have a current fee of $200 with a full cost of $1,000, representing
20% cost recovery. If the current policy is 80% cost recovery, the current fee would need
to increase by $600, bringing the fee to $800, to comply with the current policy. Assuming
this service is something the City provides quite often, and affects various members of
the community, an instant increase of $600 may not be feasible. Therefore, the City could
take a phased approach, whereby it increases the fee annually over a set period until cost
recovery is achieved.
Raising fees over a set period of time not only allows the City to monitor and control the
impact to applicants, but also ensure that applicants have time to adjust to significant
increases. Continuing with the example laid out above, the City could increase the fee by
$150 for the next four years, spreading out the increase. Depending on the desired overall
increase, and the impact to applicants, the City could choose to vary the number of years
by which it chooses to increase fees. However, the project team recommends that the
City not phase increases for periods greater than five years, as that is the maximum
window for which a comprehensive fee assessment should be completed.
2 Annual Adjustments
Conducting a comprehensive analysis of fee-related services and costs annually would
be quite cumbersome and costly. The general rule of thumb for comprehensive fee
analyses is between three and five years. This allows for jurisdictions to ensure they
account for organizational changes such as staffing levels and merit increases, as well
as process efficiencies, code or rule changes, or technology improvements.
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Developing annual update mechanisms allow jurisdictions to maintain current levels of
cost recovery, while accounting for increases in staffing or expenditures related to permit
services. The two most common types of update mechanisms are Consumer Price Index
(CPI) and Cost of Living Adjustment (COLA) factors. The following points provide further
detail on each of these mechanisms.
• COLA / Personnel Cost Factor: Jurisdictions often provide their staff with annual
salary adjustments to account for increases in local cost of living. These increases
are not tied to merit or seniority, but rather meant to offset rising costs associated
with housing, gas, and other livability factors. Sometimes these factors vary
depending on the bargaining group of a specific employee. Generally, these factors
are around two or three percent annually.
• CPI Factor: A common method of increasing fees or cost is to look at regional cost
indicators, such as the Consumer Price Index. These factors are calculated by the
Bureau of Labor Statistics, put out at various intervals within a year, and are
specific to states and regions.
The City of Saratoga should review its current options internally (COLA) as well as
externally (CPI) to determine which option better reflects the goals of the Department and
the City. If choosing a CPI factor, the City should outline which CPI should be used,
including specific region, and adoption date. If choosing an internal factor, again, the City
should be sure to specify which factor if multiple exist.
3 Policies and Procedures
This study has identified areas where the City is under-collecting the cost associated with
providing services. This known funding gap is therefore being subsidized by other City
revenue sources.
Development of cost recovery policies and procedures will serve to ensure that current
and future decision makers understand how and why fees were determined and set, as
well as provide a road map for ensuring consistency when moving forward. The following
subsections outline typical cost recovery levels and discuss the benefits associated with
developing target cost recovery goals and procedures for achieving and increasing cost
recovery.
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1 Typical Cost Recovery
The Matrix Consulting Group has extensive experience in analyzing local government
operations across the United States and has calculated typical cost recovery ranges. The
following table outlines these cost recovery ranges by major service area.
Table 21: Typical Cost Recovery Ranges by Department
Department / Program Typical Cost Recovery Ranges
Building 80-100%
Code Compliance 50-70%
Engineering 70-100%
Finance 20-40%
Planning 50-80%
Information presented in the table above is based on the Matrix Consulting Group’s
experience in analyzing local governments’ operations across the United States and
within California and reflects typical cost recovery ranges observed by local adopting
authorities. The following graph depicts how Saratoga compares to industry cost
recovery range standards.
Overall, the City’s cost recovery varies. Engineering and Planning are within typical cost
recovery levels. Finance and Code Compliance are above typical cost recovery. Building
is below the typical cost recovery range.
74%
78%
96%
48%
63%
0%
20%
40%
60%
80%
100%
Bu
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Pla
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Current Revenue Cost Recovery vs. Typical Revenue Cost Recovery
Typical Cost Recovery Current Cost Recovery
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2 Development of Cost Recovery Policies and Procedures
The City should review the current cost recovery levels and adopt a formal policy
regarding cost recovery. This policy can be general in nature and can apply broadly to the
City as a whole, or to each department and division specifically. A department specific
cost recovery policy would allow the City to better control the cost recovery associated
with different types of services being provided and the community benefit received.
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Appendix – Comparative Survey
As part of the Cost of Services (User Fee) study for the City of Saratoga, the Matrix
Consulting Group conducted a comparative survey of development service fees. The
Department identified six (6) Bay Area jurisdictions to be included in the comparative
survey: Campbell, Cupertino, Los Altos, Los Altos Hills, Los Gatos, and Palo Alto. The
project team then reviewed public documents (i.e., agenda items, staff reports, budgets,
fee schedules, and ordinances), and or contacted jurisdictions to get comparative
information.
While this report will provide the City with a reasonable estimate and understanding of
the true costs of providing services, many jurisdictions also wish to consider the local
“market rates” for services as a means for assessing what types of changes in fee levels
their community can bear. However, a comparative survey does not provide adequate
information regarding the relationship of a jurisdiction’s cost to its fees.
The following sections detail various factors to consider when reviewing comparative
survey results, as well as graphical comparisons of current fees and total calculated
costs for various permits issued or services provided by the City of Saratoga.
1 Economic Factors
To provide additional context to the comparative survey information, the project team
collected economic factors for the jurisdictions included. Three important economic
factors to consider when comparing fees across multiple jurisdictions are: population,
budget, and workforce size. The following tables rank each jurisdiction from smallest to
largest for each of these economic factors:
Table 22: Ranking of Jurisdictions by Population
Jurisdiction 2020 Population2
Los Altos Hills 8,489
Saratoga 31,051
Los Altos 31,625
Los Gatos 33,529
Campbell 43,959
Cupertino 60,381
Palo Alto 68,572
2 Population data is pulled from April 2020 census.
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Table 23: Ranking of Jurisdictions by Citywide Total Budget3
Jurisdiction FY23 Budget
Palo Alto $965,945
Los Altos Hills $25,243,147
Saratoga $39,403,018
Los Altos $73,284,282
Los Gatos $80,570,995
Cupertino $130,587,325
Campbell $160,256,949
Table 24: Ranking of Jurisdictions by FTE
Jurisdiction FY22/23 FTE
Los Altos Hills 54
Saratoga 57
Los Altos 136
Los Gatos 165
Campbell 171
Cupertino 225
Palo Alto 1,018
Based on the data shown in the previous tables, the City of Saratoga ranks on the low end
of surveyed jurisdictions in terms of population, budget, and FTE count.
2 Recency Factor
While the previous comparative information can provide some perspective when
comparing the City of Saratoga’s fees with surveyed jurisdictions, other key factors to
consider are when a jurisdiction’s fee schedule was last updated and when the last
comprehensive analysis was completed. The following tables detail when each surveyed
jurisdiction last updated their fee schedule and last conducted a fee study.
Table 25: Last Fee Schedule Updated
Jurisdiction Response
Campbell 7/1/21
Los Altos Hills 8/23/21
Palo Alto 6/20/22
Los Altos 7/1/22
Los Gatos 7/1/22
Cupertino 7/18/22
3 To ensure appropriate comparisons, full operating budget (all funds) has been used for all jurisdictions.
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Table 26: Last Fee Study Conducted
Jurisdiction Response
Los Altos Hills 2014
Cupertino 2015
Palo Alto 2014
Campbell N / A
Los Altos N / A
Los Gatos N / A
Of the jurisdictions which the project team was able to find data, one has conducted a
fee study within the last five years. However, most jurisdictions do adjust their fees
annually.
It is important to note that even though jurisdictions may have conducted fee studies,
fees are not always adopted at full cost recovery. The comparative results will only show
the adopted fees for the surveyed jurisdictions, not necessarily the full cost associated
with the comparable service.
3 Additional Factors
Along with keeping the statistics outlined in the previous sections in mind, the following
issues should also be noted regarding the use of market surveys in the setting of fees for
service:
• Each jurisdiction and its fees are different, and many are not based on the actual
cost of providing services.
• The same “fee” with the same name may include more or less steps or sub-
activities. In addition, jurisdictions provide varying levels of service and have
varying levels of costs associated with providing services such as staffing levels,
salary levels, indirect overhead costs, etc.
Market surveys can run the risk of creating a confusing excess of data that will obscure
rather than clarify policy issues. Because each jurisdiction is different, the Matrix
Consulting Group recommends that the information contained in the market comparison
of fees be used as a secondary decision-making tool, rather than a tool for establishing
an acceptable price point for services.
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4 Comparative Survey Results
As part of this study, the project team conducted a survey of how the City’s current user
fees and calculated full cost compare to other identified jurisdictions. The following
subsections provide a comparative look at several fee-related services provided by the
City versus the surveyed jurisdictions.
1 Water Heater Replacement
Currently, Saratoga charges an $80 fee to permit a water heater. Through this study, the
project team calculated the full cost of this service to be $199. The following graph shows
how the department’s current fee and full cost compared to the surveyed jurisdictions.
Saratoga’s current fee is below all comparable jurisdictions surveyed and is closest to
Los Altos Hills’ fee of $82. Saratoga’s full cost is above all comparable jurisdictions and
is closest to Campbell’s fee of $155. The jurisdictional average for water heater
replacements is $113. It should be noted that historically, these fees are set below cost
recovery to ensure permit compliance.
2 Residential ADU –$100,000 Valuation and 500 sq. ft.
Currently, Saratoga charges a $2,049 fee, including plan check and permit costs, for a 500
sq. ft. residential accessory dwelling unit (ADU) valued at $100,000. Through this study,
the project team calculated the full cost of this service to be $2,700. The following graph
shows how the department’s current fee and full cost compared to the surveyed
jurisdictions.
$0
$50
$100
$150
$200
$250
Saratoga -
Current Fee
Saratoga - Full
Cost
Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Water Heater Replacement
Fee Average
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Saratoga’s current fee is below the jurisdictional average of $2,803 and is closest to Los
Altos Hills’ fee of $1,881. Saratoga’s full cost is also below the jurisdictional average and
is closest to Palo Alto’s fee of $2,746. The highest fee is charged by Cupertino at $4,003.
3 Single Family Home - $450,000 Valuation and 2,000 sq. ft.
Currently, Saratoga charges a $6,092 fee, including plan check and permit costs for a
2,000 sq. ft. single family home valued at $450,000. Through this study the project team
calculated the full cost of this service to be $8,055. The following graph shows how the
department’s current fee and full cost compare to the surveyed jurisdictions.
Saratoga’s current fee is below all comparable jurisdictions and is closest to Los Altos
Hills’ fee of $7,079. Saratoga’s full cost is also below the jurisdictional average and is
closest to Los Altos’ fee of $8,464. The highest fee is charged by Campbell at $13,770.
4 New Commercial Building - $1.5 Million Valuation and 5,000 sq. ft.
Currently, Saratoga charges a $15,329 fee, including plan check and permit costs, for a
5,000 sq. ft. new commercial building valued at $1.5 million. Through this study, the
project team calculated the full cost of this service to be $20,520. The following graph
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
Saratoga -
Current Fee
Saratoga - Full
Cost
Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Residential ADU ($100,000; 500 sq.ft.)
Plan Check Permit Fee Average
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Saratoga -
Current Fee
Saratoga - Full
Cost
Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Single-Family Home ($450,000; 2,000 sq.ft.)
Plan Check Permit Fee Average
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shows how the department’s current fee and full cost compare to the surveyed
jurisdictions.
Saratoga’s current fee is below the jurisdictional average of $26,517 and is closest to
Cupertino’s fee of $13,475. Saratoga's full cost is also below the jurisdictional average
and is closest to Los Altos Hills’ fee of $22,671. Palo Alto charges the highest fee at
$41,213.
5 Commercial Office Tenant Improvement (TI) - $250,000 Valuation and 1,200 sq.
ft.
Currently, Saratoga charges a $3,782 fee, including plan check and permit costs, for a
1,200 sq. ft. commercial office tenant improvement valued at $250,000. Through this
study, the project team calculated the full cost of this service to be $4,995. The following
graph shows how the department’s current fee and full cost compared to the surveyed
jurisdictions.
Saratoga’s current fee is below all comparable jurisdictions and is closest to Los Altos
Hills’ fee of $4,109. Saratoga’s full cost is also below the jurisdictional average of $5,999
and is closest to Los Altos’ fee of $5,164. The highest fee is charged by Cupertino at
$7,704.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
Saratoga -
Current Fee
Saratoga - Full
Cost
Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
New Commercial Building ($1.5 million; 5,000 sq.ft.)
Plan Check Permit Fee Average
$0
$2,000
$4,000
$6,000
$8,000
$10,000
Saratoga -
Current Fee
Saratoga - Full
Cost
Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Office Tenant Improvement ($250,000; 1,200 sq. ft.)
Plan Check Permit Fee Average
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6 Improvements - $50,000 Valuation
Currently, Saratoga charges a $15,300 fee, including plan check and inspection, to permit
an improvement valued at $50,000. Through this study, the project team calculated the
full cost of this service to be $31,812. The following graph shows how the department’s
current fee and full cost compared to the surveyed jurisdictions.
Saratoga’s current fee and full cost are higher than all comparable jurisdictions and are
closest to Los Gatos’ fee of $13,141. The lowest fee is charged by Los Altos Hills at
$1,326, which is charged as a deposit.
7 Improvements - $250,000 Valuation
Currently, Saratoga charges a $45,300 fee, including plan check and inspection, to permit
an improvement valued at $250,000. Through this study, the project team calculated the
full cost of this service to be $25,893. The following graph shows how the department’s
current fee and full cost compared to the surveyed jurisdictions.
Saratoga’s current fee is above the jurisdictional average of $23,435 and is closest to Los
Gatos’ fee of $46,490 which is the highest fee charge by all comparable jurisdictions.
Saratoga full cost is also above the jurisdictional average and is closest to Palo Alto’s fee
of $27,212. Los Altos Hills has the lowest fee, which is charged as a deposit.
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
Saratoga - Current
Fee
Saratoga - Full Cost Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Improvements -$50,000
Fee Average
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
Saratoga - Current
Fee
Saratoga - Full Cost Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Improvements -$250,000
Fee Average
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8 Encroachment Application
Currently, Saratoga charges a fee of $510 for an encroachment permit application.
Through this study, the project team calculated the full cost of this service to be $1,190.
The following graph shows how the department’s current fee and full cost compared to
the surveyed jurisdictions.
Saratoga’s current fee is below the jurisdictional average of $630 and is closest to Los
Gatos’ fee of $1,370. Saratoga’s full cost is above the jurisdictional average and is closest
to Palo Alto’s fee of $1,481, which is the highest of all comparable jurisdictions at $1,481.
9 Tree Removal Permit
Currently, Saratoga charges a fee of $130 for tree removal permits. Through this study,
the project team calculated the full cost of this service to be $321. The following graph
shows how the department’s current fee and full cost compared to the surveyed
jurisdictions.
Saratoga’s current fee is below the jurisdictional average of $262.53 and is closest to Los
Alto’s fee of $82. Saratoga’s full cost is above the jurisdictional average and is closest
to Cupertino’s fee of $301. Palo Alto charges the highest fee at $443.
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Saratoga - Current
Fee
Saratoga - Full Cost Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Encroachment Application
Fee Average
$-
$100
$200
$300
$400
$500
Saratoga - Current
Fee
Saratoga - Full Cost Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Tree Removal Permit
Fee Average
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10 Appeal to Planning Commission
Currently, Saratoga charges a fee of $410 for appeals to the Planning Commission.
Through this study, the project team calculated the full cost of this service to be $2,476.
The following graph shows how the department’s current fee and full cost compared to
the surveyed jurisdictions.
Saratoga’s current fee is below the jurisdictional average and is closest to Cupertino’s fee
of $347. Saratoga’s full cost is higher than all comparable jurisdictions and is closest to
Los Gatos’ fee of $934. The lowest fee is charged by Campbell at $200. It should be noted
that appeal fees are often set well below cost recovery so as not be a barrier for the
community.
11 Conditional Use Permit – Planning Commission Review
Currently, Saratoga charges a fee of $4,490 for conditional use permits requiring planning
commission review. Through this study, the project team calculated the full cost of this
service to be $9,498. The following graph shows how the department’s current fee and
full cost compared to the surveyed jurisdictions.
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Saratoga - Current
Fee
Saratoga - Full Cost Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Appeal to Planning Commission
Fee Average
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Saratoga - Current
Fee
Saratoga - Full Cost Campbell Cupertino Los Altos Los Altos Hills Los Gatos Palo Alto
Conditional Use Permit -Planning Commission Review
Fee Average
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Saratoga’s current fee is below the jurisdictional average of $7,149 and is closest to
Campbell’s fee of $4,142. Saratoga’s full cost is above the jurisdictional average and is
closest to Cupertino’s fee of $7,048. The highest fee is charged by Palo Alto at $13,413.
12 Temporary Use Application – Administrative Review
Currently, Saratoga charges $435 for administrative review of a temporary use
application. Through this study, the project team calculated the full cost of this service to
be $555. The following graph shows how the department’s current fee and full cost
compared to the surveyed jurisdictions.
Saratoga’s current fee and full cost are below the jurisdictional average of $2,500 and are
lower than all comparable jurisdictions. Cupertino charges the highest fee at $4,256.
13 Sign Application Review
Currently, Saratoga charges a $310 fee for administrative review of a sign application.
Through this study, the project team calculated the full cost of this service to be $662.
The following graph shows how the department’s current fee and full cost compared to
the surveyed jurisdictions.
Saratoga’s current fee is below the jurisdictional average of $532 is the closest to Los
Gatos’ fee of $328. Saratoga's full cost is above the jurisdictional average and is closest
to Cupertino’s fee of $481. Palo Alto charges the highest fee at $1,161.
$-
$1,000
$2,000
$3,000
$4,000
$5,000
Saratoga - Current Fee Saratoga - Full Cost Campbell Cupertino Palo Alto
Temporary Use Application -Admin Review
Fee Average
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
Saratoga - Current Fee Saratoga - Full Cost Campbell Cupertino Los Altos Los Gatos Palo Alto
Sign Application Review -Admin
Fee Average
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5 Summary
Based upon the comparative survey, the full cost calculated is generally higher than the
current fee charged. Most of the fees compared in this survey showed full costs that
exceeded the average fee charged by comparable jurisdictions. However, as many of the
jurisdictions have not conducted a fee study in the last ten years, it is not accurate to
compare these fees. It is important to note that the results of this survey only show the
fees adopted by council, not the cost recovery policy decisions for departments or a
jurisdiction. As such, the results of this survey should be used as a secondary decision-
making tool.
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