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CITY OF REDWOOD CITY, CALIFORNIA <br />Cost of Services (User Fee) Study <br />Matrix Consulting Group Page 8 <br />Funding for local government is obtained from a myriad of revenue sources such <br />as taxes, fines, grants, special charges, user fees, etc. In recent years, alternative tax <br />revenues, which typically offset subsidies for services provided to the community, have <br />become increasingly limited. These limitations have caused increased attention to user <br />fee activities as a revenue source that can offset costs otherwise subsidized (usually) by <br />the general fund. In the table on the previous page, services in the “global benefit” <br />section tend to be funded primarily through voter approved tax revenues. In the middle <br />of the table, one typically finds a mixture of taxes, user fee, and other funding sources. <br />Finally, in the “individual / group benefit” section of the table, lie the services provided by <br />local government that are typically funded almost entirely by user fee revenue. <br /> The following are two central concepts regarding the establishment of user fees: <br />• Fees should be assessed according to the degree of individual or private <br />benefit gained from services. For example, the processing and approval of a <br />land use or building permit will generally result in monetary gain to the applicant, <br />whereas Police services and Fire Suppression are examples of services that are <br />essential to the safety of the community at large. <br /> <br />• A profit-making objective should not be included in the assessment of user <br />fees. In fact, California laws require that the charges for service be in direct <br />proportion to the costs associated with providing those services. Once a charge <br />for service is assessed at a level higher than the actual cost of providing a <br />service, the term “user fee” no longer applies. The charge then becomes a tax <br />subject to voter approval. <br /> <br />Therefore, it is commonly accepted that user fees are established at a level that <br />will recover up to, and not more than, the cost of providing a particular service. <br />2. GENERAL POLICY CONSIDERATIONS REGARDING USER FEES <br /> Undoubtedly, there are programs, circumstances, and services that justify a <br />subsidy from a tax based or alternative revenue source. However, it is essential that <br />jurisdictions prioritize the use of revenue sources for the provision of services based on <br />7.A. - Page 20