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HomeMy WebLinkAboutOB 1 NON-RES REGIS FEES 1-21-91;GENDA �- -a OLD BUSINESS NO. 1 1-21-91 kTE: January 16, 1991\A tj e Inter - Com TO: WILLIAM A. HUSTON FROM: COMMUNITY SERVICES DEPARTMENT SUBJECT: COUNCIL POLICY REVISION - SECTION NUMBER 1 OF POLICY 4-05 NON-RESIDENT REGISTRATION FEES RECION To revise Section Number 1 of Policy 4-05 (Attachment A) regarding non-resident fees for recreation programs to be a separate $5.00 per class instead of the percentage and earmark those funds for park development as recommended by the Parks and Recreation Commission and the Community Services staff. FISCAL IMPACT Since the current non-resident fees are combined with the class fee, there may be a slight decrease in revenues. There would also be a decrease in expenditures. With the average non-resident fee differential of $8.79, the City only retains 30 percent of that amount, or $2.64. The remainder goes to the class instructor. The separate $5.00 flat fee would increase the amount of money retained by the City. Instead of retaining just 30 percent of the non-resident fee differential, the City would retain the entire amount. (Attachment B) Net revenue loss to the General Fund, staff estimates would be $3,000 to $5,000. However, with a separate $5.00 flat fee, an additional $10,000 or more could be generated for the Park Development Fund. Recreation programs shall continue to be self-sustaining as far as direct costs are concerned with an appropriate administrative overhead added to the class fee. The non-resident fee is in addition to the normal overhead and is charged to cover facility and long term maintenance costs that residents pay for with property taxes. All other portions of the Council Policy shall remain the same. This change could be effective Summer Session 1991. Non -Resident Registration Fees Page 2 At the August 6th meeting, the City Council considered the Parks and Recreation Commission recommendation regarding revision of the Non -Resident Recreation Fee Policy. The Council had questions regarding the legality of the proposed fee structure. Even though the City Attorney's Office had reviewed the proposal, the Council requested the fee be reviewed again. The Council also wished more information on non-resident fees charged by other cities such as, Irvine and Cerritos, and requested staff research increasing the fee even more. Following discussion at the August, 1990 Meeting, the Council decided more information was needed and referred the appropriate items to Parks and Recreation Commission and to the City Attorney's Office. On October 18, 1990, the Parks and Recreation Commission reconsidered the revision of Section Number 1 of Policy 4-05 which sets non-resident fees for recreation classes. At this meeting the Commission reaffirmed its recommendation that non-residents be assessed a $5.00 per class fee. After review of the additional research conducted by Community Services Department Staff and the City Attorney's opinion, the Commission concurred with the earlier recommendation that this new non-resident fee structure will secure needed funds for future facilities while streamlining the fee system for Community Services Department staff and customers. COUNCIL ISSUES 1. The legality of the proposed Non -Resident Fee. Both the current and proposed non-resident fees are charges over and above the normal administrative overhead costs to provide each class. The rationale for the non-resident fee is that Tustin residents pay property taxes to the General Fund that support the long term maintenance and operation, as well as construction of recreation facilities in Tustin. The proposed surcharge would make a contribution towards that expense by non-residents who do not pay property taxes to the General Fund. The City Attorney's office has reviewed the policy, and has found that the proposed surcharge is legal and reasonable. It is the Attorney's opinion that any higher fees might be considered unreasonable and discriminatory particularly when it doubles the cost of providing the class. (Attachment C) In regards to whether or not the City could deposit the non- resident fee into the Park Development Fund, the City Attorney Non -Resident Registration Fees Page 3 ruled that the City had the discretion to deposit the funds however it chooses. Recreational fees are not mandated to be paid into the General Fund as are other types of fees and charges. Depositing the fees in the Park Development Fund would ensure that the fees would be used for the long term maintenance, operation, and construction of Tustin recreation facilities. The Parks and Recreation Commission concurs that these fees should be deposited into the Park Development Fund. However, the Commission is concerned that this issue not be an impediment to the Council's implementation of the revisions recommended. 2. Comparison of the non-resident fees in other cities, with a special request to review the cities of Irvine, and Cerritos. When the Commission first considered the non-resident fee, staff surveyed all Orange County Cities. (Attachment D) Eighteen out the twenty-six Orange County Cities do not charge a non-resident fee, including the City of Irvine. Five cities charged a nominal fee of $2 to $5 per class for non-residents. Buena Park is the only city besides Tustin, with a 50 percent surcharge. The City of Westminster also charges a percentage rate; however, that rate is higher and ranges from 52 percent to 67 percent. This policy has been in effect for 2 years. During that time the participation in adult classes has dropped from more than 200 participants per session to approximately 70. Westminster staff attributes the decrease in enrollment to over -pricing of classes. People who live nearby the Westminster facilities, and would normally participate no longer enroll because of the high prices. Such a loss in enrollment in classes in Tustin would result in cancellation of classes, thereby eliminating many recreational activities for Tustin residents. The Council also suggested staff review fee policies in Cerritos which does have a 50 percent non-resident surcharge similar to that of Tustin. Cerritos provides programs subject to the surcharge two basic ways. Some classes are provided by independent contractors which are required to cover all costs similar to Tustin's. City of Cerritos staff reports the surcharge does discourage non-resident participation in their programs. The City of Cerritos also provides programs through regular city staff. These classes charge a nominal fee to cover only material costs. These classes do not recover direct costs as do all of Tustin's classes. The City of Cerritos subsidizes the instructor expense. For comparison purposes, the class "Future Chefs -Kids in the Kitchen", a six week class in Cerritos is $12 for residents and $18 for non-residents and is Non -Resident Registration Fees Page 4 taught by City Staff. The same class called Giggling Gourmets in Tustin, also a six week class charges $25 for residents and $37.50 for non-residents. This difference in price is because in Tustin the class is taught by an independent contractor who sets his own class fees. Because of the subsidy, Cerritos' non-resident fee differential is nominal compared to Tustin's fee differential. 3. The non-resident fee should be higher than the proposed $5.00. At various meetings, the Parks and Recreation Commission discussed several ways to restructure the fee. The $5.00 per class was the alternative the Commission felt was the most reasonable and simplest to administer. Any higher fee would over price classes and possibly discourage participation and cause many classes to be canceled. As previously stated in the report the City Attorney felt the fee was "valid" as long as it was reasonable. Any higher fees might make the City more susceptible to claims of unreasonableness. SUMMARY The Parks and Recreation Commission began discussing this policy in November of 1989. Several alternatives were explored in an effort to be equitable to all class participants both residents and non- residents. The Commission reviewed the pros and cons of all the alternatives. The recommendation to the Council is what the Commission thought was the best alternative. Totally eliminating the fee would decrease revenues and would not provide an advantage for Tustin Tax Payers. Not allowing non-residents in Tustin programs would be discriminatory and could decrease participation by as much as 45 percent. This could result in cancellation of programs and subsequent loss of recreation activity opportunities for Tustin residents. Not changing the policy didn't solve the confusion of setting fees and administering the program. Changing to a standard non-resident registration fee would simplify the entire process with a minimal loss of overall revenues, although revenues could increase by encouraging more participation from non- residents. Under the current system of compensation and because of the way the fees are structured, the instructors receive 70 percent of total class fees for both residents and non-residents. Separating the non-resident fee from the class fee gives the entire amount to the City instead of just 30 percent. The 70 percent/30 percent city split was adopted by the City of Tustin in 1981 and is the standard for most Orange County Cities. This was done in order to attract and retain quality instructors and to streamline staff operations as there were no computer programs at that time to process registrations or payment of instructors. Non -Resident Registration Fees Page 5 When the policy was first discussed with the Commission, Staff recommended total elimination of the fee differential because of negative feelings the policy created with all of the City's non- resident customers. This was not supported by a Commission majority. After much discussion the $5.00 increment could be justified by the fact that non-residents do not pay property taxes to the City. The new fee could be considered a processing fee, according to the Attorney's Office, and would cover costs of long term maintenance and operation of recreation facilities. The proposed flat fee could provide an estimated $10, 000 or more in revenue each year to be used towards park development. Since the Department's registration and class operations are all computerized, it would take relatively a little amount of time with a standard f ee to set up a separate account. The f act that the f ee is a single amount and $5.00 would simplify the process. Also, there may be an increase in revenue by encouraging more non- residents to participate in City Programs. RELEVANT ISSUES The present policy 4-05 adds a surcharge up to 50 percent in addition to regular class fees. These surcharge fees vary according to the cost of providing the class, and are included in the class fee. The differential for non-resident fees ranges from $5.00 to $15.00 per class with an average difference of $8.79. Currently each class is listed in Tustin Today with two fees, one for residents, one for non-residents. There is no uniformity, and the system is confusing to participants and for staff to administer. Under the present system, every registration must be checked for residency, extra computer codes are needed to differentiate residents and non-residents. The double pricing standard makes the Tustin Today difficult to read. Also due to the irregularity of the City's boundaries, many customers do not know if they are residents. Sometimes it is difficult to determine who is a resident by address only. Some of the areas of the County have a Tustin address and zip code, while other areas recently annexed still have a Santa Ana address and zip code even though the area is now within the city limits. All the current class instructors are independent contractors and are not City Employees. Instructors set their own fees, hours, days, length of classes, minimum/maximum number of students. The non-resident fee structure makes pricing difficult affecting the residents as well as the non-residents. In a recent survey, the majority of class instructors were in favor of eliminating the non- resident fee. Many thought that the elimination of the fee would encourage more participation in their classes. Non -Resident Registration Fees Page 6 ALTERNATIVES PREVIOUSLY DISCUSSED 1. Charge a non-resident fee differential as a standard fee and earmark the surcharge towards the construction of new facilities. A. Advantages 1. This would secure future revenues for new facilities. 2. Non -Residents would know exactly how the surcharges are being used. Residents already pay taxes earmarked for City Services and Capital Improvements. 3. There would be one standard fee, instead of a variable percentage that now exists. B. Disadvantages 1. The revenue generated would be minimal verses the staff time to administer. Estimated yearly revenue could possibly be $10,00 a year. The staff time is still needed for computer data entry for non-resident fees and does not reflect the extra time needed to explain the policy or to handle unhappy customers. 2. This system would not simplify the operation as much as total elimination of the fee. The cost in time would be the same as not changing the policy. This is the alternative the Commission supported and recommended to the City Council at the August 6, 1990 meeting. 2. Eliminate the fee differential. A. Advantages 1. The elimination of the non-resident surcharges would be in accordance with the City's commitment to customer service. There are at least 10 disgruntled customers every quarter who adamantly complain to the staff about the fee structure. 2. Elimination of the non-resident fee differential could increase the demand for Non -Resident Registration Fees Page 7 classes. The lower cost might encourage greater participation, therefore increase revenues. 3. The current industry standard is not to have surcharges. Eighteen Orange County cities do not have surcharges. Five have a small surcharge of $2 to $3 per class. Tustin's average surcharge is $8.79 with a range of $5 to $15. 4. The deletion of the non-resident surcharge would simplify the operation of the Community Services Department, saving time and money. B Disadvantages 1. There is a possibility of a negative reaction from Tustin residents. Residents would still retain the two week priority registration in order to have the first opportunity at class registration. 2. There is a possibility of revenue loss the f irst few months. However , staf f believes the loss would be short termed as new customers are attracted to the program and instructors adjust their fees. 3. Do not allow any non-residents in Recreation Programs. A. Advantages 1. There would be one fee schedule. B. Disadvantages 1. This could cause a negative reaction from all non-residents currently using recreation classes. Some non-residents have been in the program for many years. This might also be a form of discrimination. 2. This alternative would eliminate most of the current recreation classes. Without non- residents, most classes would not be able to meet the minimum number of students required to provide the class. Forty to forty-five percent of the students are non-residents. There could be a drastic drop in revenue and participation. Non -Resident Registration Fees Page 8 3. This alternative may be illegal if the facilities used for classes were built with State or Federal monies. 4. Recommend no policy changes, keep the non-resident differential as is. A. Advantages 1. The policies are currently in place. 2. Current residents and non-residents are used to the system. B. Disadvantages 1. The current system causes confusion for clients. Staff time is used trying to explain and justify the system. 2. The City's customer service policy is not served by this system. Many customers have negative reactions when told they are not Tustin residents. 3. Some non-residents are priced out of the class, causing the City to lose participants and revenue. 4. The policy of charging a surcharge to non- residents is not an industry standard. Buena Park and Westminster are the only other cities in Orange County that charge a 50 percent or higher non-resident surcharge. 5. The policy is costly to administer. Each registration must be checked for residency and separate computer codes and prices are entered. �"-M. Susan M. Jon s Recreation Superintendent RW/svr -attachments 1 � 4 Roy n A. White, Dir8ctor of Com y and Administrative Services COUNCIL POLICY SUBJECT: Recreation Program Fees MIM Attachment A POLICY NO: 4-05 SECTION: Human Services APPROVED: 4-6-81 EFFLCTIVE:4-6-81 REVISED: To charge the user his or her appropriate share of the operational cost of special recreation programs, classes, and leagues. PROCEDURE The fees for recreation and cultural arts classes, special recreation programs, and sport leagues will be set by the Community Services Director within the following guidelines: 1. Non-residents will be addition to the residen Park Development Fund. powers agreement, such Tustin Park.) $5.00 per class fee assessed a/54o---stxr�cha-L e- in t fee , and earmark the fee for the (Unless prohibited by a joint as the one in effect at Columbus 2. Fees for recreation and cultural arts classes, special recreation programs, and sport leagues shall be based on a cost-plus basis. These particular programs shall be self-sustaining as far as their direct costs are concerned, and an appropriate administrative overhead shall be added. 3. It is the intent of this policy that the individuals who benefit directly from these types of programs shall be the ones to bear the burden of the costs. 4. Exceptions to the "cost-plus" basis shall be made at the discretion of the Community Services Director, in cases where special consideration may be warranted. This Council policy supersedes Section "C" of Resolution 80- 28. This affects recreation and cultural arts classes, special recreation programs, and sport leagues. The fees for building rental_, sport facilities, and parks will still be handled by the appropriate resolution of the City Council. PROPOSED 1`[OlV-RESIDENT FEE FORA $31 CLASS PLUS $5 DIFFERENTIAL DIFFERS (CIT $5(13 CITY PERCENTAGE $9.30 (25.8%) CITY TOTAL $14.30 (39.7%) INSTRUCTORS TOTAL $21.70 (60.3%) $36.00 (100%) Attachment B INSTRUCTOR PERCENTAGE $21.70 (60.3%) CURRENT NON-RESIDENT FEE FOR A $ 31 /RESIDENT - $ 4O/NON-RESIDENT CLASS CITY PERCENT $12(30% CITY TOTAL $ 12.00 (30%) INSTRUCTORS TOTAL $28.00 (70%) $44.00 (100%) INSTRUCTOR PERCENTAGE $28(70%) ATE: September 11, 199 TO: SUSAN M. JONES, COMMUNITY SERVICES FROM: CITY ATTORNEY SUBJECT: NON-RESIDENT REGISTRATION FEES Attachment u Inter - Com Differentiation between residents' and non-residents' fees for use of recreational facilities is valid as long as it is reasonable. Our understanding is that the purpose for the distinction in fees is founded on the recognition that City residents, through taxes, pay for the upkeep of recreational facilities, while non- residents, who are enjoying the use of these same facilities are not paying taxes. The additional fee is intended to somewhat balance this inequity. We believe this is a legal and reasonable rationale for the distinction. Although the City may charge different fees for residents and non-residents, the difference in fees cannot be arbitrary or oppressive. Whatever the City decides will be the difference in the fees, it should be based on some relationship between monies paid by residents which contribute to the upkeep of recreational facilities and the additional fees being charged to non-residents. It is difficult to draw a bright line as to when the differentiation in fees becomes unreasonable. However, the greater the differentiation, the more susceptible the City becomes to claims of unreasonableness. A second related issue is whether the City can mandate that the fees collected go into a special fund for parks and recreation purposes. The City has discretion to segregate and divide monies belonging to the City into whatever separate funds it desires for administrative purposes. By statute, the City is required to place Inter -Com to Susan M. Jones Page Two September 11, 1990 all monies from licenses, fines,- penalties and forfeiture into the General Fund. However, there is no statute requiring that fees from recreational activities be paid into the General Fund. J G. ROURKE City Attorney DAD:cj♦:R:9/5/90:S474.tw cc: W. Huston Deputy Cit ­� k. 4A4. LLULC LLL L 'IVEY OF ORANGE COUNTY CITIES REGARDING NON-RESIDENT REGISTRATION FEES ANAHEIM BREA BUENA PARK COSTA MESA CYPRESS FOUNTAIN VALLEY FULLERTON GARDEN GROVE HUNTINGTON BEACH IRVINE LAGUNA BEACH LA PALMA LA HABRA LOS ALAMITOS MISSION VIEJO NEWPORT BEACH ORANGE PLACENTIA -SAN CLEMENTE SAN JUAN CAPISTRANO "",TTA ANA NTON •j.,jSTIN VILLA PARK WESTMINSTER YORBA LINDA SUMMARY: TOTAL CITIES SURVEYED: CHARGES NON-RESIDENT HOW MUCH REGISTRATION FEE 25 YES $3/PER CLASS YES $5/PER CLASS YES 50% MORE NO NO NO NO NO NO NO NO YES $2/PER CLASS NO NO NO NO NO YES $3/PER CLASS NO NO NO NO YES UP TO 500 NO PROGRAMS YES 52% TO 67% YES 2.50/PER CLASS TOTAL NUMBER OF CITIES NOT CHARGING NON-RESIDENTIAL FEE DIFFERENTIAL: 18 TOTAL NUMBER OF CITIES CHARGING A MINOR DIFFERENTIAL ($2-$5): 5 TOTAL NUMBER OF CITIES CHARGING 50% DIFFERENTIAL OR MORE: 3