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CITY OF REDWOOD CITY, CALIFORNIA <br />Cost of Services (User Fee) Study <br />Matrix Consulting Group Page 11 <br /> <br />3. USER FEE STUDY METHODOLOGY <br /> <br />The Matrix Consulting Group utilizes a cost allocation methodology, commonly <br />known and accepted as the “bottom-up” approach to establishing User Fees. The term <br />means that several cost components are calculated for each fee or service. These <br />components then build upon each other to comprise the total cost for providing the <br />service. The components of a full cost calculation are typically as follows: <br />Cost Component Description <br /> <br />Direct <br /> <br />Salaries, benefits and allowable departmental expenditures. <br /> <br />Departmental Overhead <br /> <br />Division or Departmental administration / management and clerical support. <br /> <br />Citywide Overhead <br /> <br />City costs associated with central service costs such as payroll, human <br />resources, budgeting, City management, etc. Established for this Study <br />through a separate Study performed by the Matrix Consulting Group. <br /> <br /> The general steps utilized by the project team to determine allocations of cost <br />components to a particular fee or service is: <br />• Calculate fully burdened hourly rates by position, including direct & indirect costs; <br /> <br />• Develop time estimates for each service included in the study; <br />• Ensure that not more than 100% of a position’s time is allocated between fee & <br />non-fee services. <br /> <br /> The result of these allocations provides detailed documentation for the <br />reasonable estimate of the actual cost of providing each service. The following <br />subsections discuss critical points about the use of time estimates and cross-checks to <br />ensure the validity of the user fee results. <br />1. TIME ESTIMATES ARE A MEASURE OF SERVICE LEVELS REQUIRED TO <br />PERFORM A PARTICULAR SERVICE <br /> <br /> One of the key study assumptions utilized in the “bottom up” approach is the use <br />7.A. - Page 23