Honorable Mayor and Members of the Hermosa Beach City Council
Special Meeting of February 15, 2024
Title
DISCUSSION REGARDING THE FEES FOR CONDITIONAL USE
PERMITS (CUP) AND AMENDMENTS TO ENTITLEMENTS FOR
OUTDOOR DINING
(Continued from January 23, 2024)
(Community Development Director Carrie Tai)
Body
Recommended Action:
Recommendation
Staff recommends City Council discuss and provide direction regarding whether the current Conditional Use Permit (CUP) fees should be maintained or updated.
Body
Executive Summary:
Staff received inquiries from the business community regarding the application fees to amend a Conditional Use Permit (CUP). The current fee to amend an entitlement, including CUPs, is $5,197. The cost for a new CUP application is $5,900. Considering the recent inquiries, and the relatively small difference of $703 in cost between the two application types, staff initiated a review of the subject application fees to provide the City Council with an opportunity to discuss whether to initiate an amendment to the master fee schedule to adjust the fees.
Background:
Fees and associated charges are established for the purpose of recovering the cost of providing services. Pursuant to the Hermosa Beach Municipal Code (HBMC) Chapter 2.64, it is the intent of the City Council to require the ascertainment and recovery of costs reasonably borne from fees and charges levied in providing regulation, products, or services. The costs reasonably borne by the City consist of the following:
A. All applicable direct costs including, but not limited to salaries, wages, fringe benefits, services and supplies, operations expenses, contracted services, special supplies, and any other direct expense incurred;
B. All applicable indirect costs including, but not restricted to, building maintenance and operations, equipment maintenance, communication, printing and reproduction, and like distributed expenses;
C. Fixed assets recovery expenses, consisting of depreciation on fixed assets, and additional charges, calculated on the cost divided by the approximate life expectancy of the fixed asset;
D. General overhead, expressed as a percentage, distributing and charging the expenses of the city council, city manager, finance department, city treasurer, city clerk, city attorney’s office, community promotion, personnel office, and all other staff and support services; and
E. Departmental overhead, expressed as a percentage, distributing, and charging the cost of each department head and his or her supporting expenses.
Fee studies consist of evaluating the time spent on a requested service, such as application review, and accounting for the staff and City overhead cost. Since the last comprehensive study for fees was adopted by the City Council on September 27, 2016, fees have been adjusted annually in December based on the Consumer Price Index (CPI) for Los Angeles, Long Beach, and Anaheim (Attachment 1).
Following the end of the COVID-19 pandemic response in February 2023, staff transmitted three notices to businesses announcing that temporary outdoor dining and retail areas would need to be removed, or applications submitted to legalize them permanently. The timing of these notices was coordinated with a similar effort for businesses operating on public property (Pier Plaza and on-street areas).
Staff identified 10 businesses requiring the CUP amendment. At the time this report was drafted 4 of the 10 businesses filed an application for a CUP amendment and paid the required filing fee. CUP Amendments are necessary when a business holds a CUP and seeks to amend its alcohol service area to reflect an expansion. The review of the CUP fees was initiated in response to businesses on private property seeking to convert its COVID-era temporary outdoor areas to permanent installations.
Discussion:
The current fee for an entitlement amendment, including CUPs, is $5,197. The cost of a new application is $5,900 (Attachment 2). Given the difference of $703 between a new CUP and an amendment, staff initiated a review of the fees. The City’s policy is to update user fees at least every five years to ensure cost recovery and subsidy levels are correct and to ensure the fees accurately reflect City processes. Staff’s review consisted of reassessing the time inputs for the cost detail worksheets, prepared in 2016, with current processes and examined the CUP charged by adjacent cities (Attachment 3). Staff plans to conclude an update of the user fee study (cost of services study) by June 2024.
The following table summarizes the staff time spent on CUP and CUP amendment applications. Upon review, staff determined that the unit times do not reflect current City processes. Specifically, review time for both Police and Building and Safety staff is not included by the fees collected for CUP and CUP amendments. Staff finds that any update to the current fees would be expected to result in some increase unless the City Council elected to subsidize the fee charged for these application types.
Staff reviewed application fees charged by other southern California cities and summarized them below.
Of the cities surveyed, the fees for Hermosa Beach fall within the average to low end of the range. The fee charged for new CUPs is approximately $2,124 less than the average and the amendment fee is comparable to the average. Staff finds that the CUP fees should be updated to reflect the current processes and acknowledges that this would likely result in an increase to fees if the City were to achieve 100 percent cost recovery. Past user fee studies adopted by City Council were set to recover 100 percent of costs for these fees. Typically, services that benefit the community as a whole are supported by tax dollars and services that benefit an individual or group are set to recover the cost of the services offered. If set to less than 100%, the amount subsidized is paid by the general taxpayer.
City Council is tasked with balancing a range of priorities which includes being fiscally responsible and supporting business community. The City Council could choose to pursue less than 100 percent cost recovery for certain applications by amending the Master Fee Schedule to reflect a subsidized application fee.
If the Council finds that subsidizing the applications is desired, staff recommends City Council direct staff to return with a new CUP Amendment fee specific to the legalization of COVID-era outdoor dining and retail spaces permitted by the City. This would provide a select number of businesses with the benefit of a reduced application fee, while businesses who no longer operate COVID-era outdoor spaces would not be eligible. Additionally, staff requests City Council provide direction on whether the City will refund any difference in application fees to businesses who already submitted applications.
General Plan Consistency:
This report and associated recommendation have been evaluated for their consistency with PLAN Hermosa, the City’s General Plan, was adopted by the City Council in August 2017. The review of the application fees aligns with the guiding principles of the General Plan which seeks to achieve the vision of PLAN Hermosa by taking actions that help to contribute to the economic and fiscal stability of the city. Relevant General Policies are listed below:
Governance Element
Goal 1. A high degree of transparency and integrity in the decision-making process.
Policies:
• 1.1 Open meetings. Maintain the community’s trust by holding meetings in which decisions are being made, that are open and available for all community members to attend, participate, or view remotely.
• 1.2 Strategic planning. Regularly discuss and set priorities at the City Council and management level to prioritize work programs and staffing needs.
• 1.6 Long-term considerations. Prioritize decisions that provide long-term community benefit and discourage decisions that provide short-term community benefits but reduce long-term opportunities.
Fiscal Impact:
There is no fiscal impact related to the recommended action. However, depending on City Council direction, staff would evaluate any fiscal impacts to the General Fund.
Attachments:
1. Link to September 27, 2016 City Council
2. 2023-2024 Master Fee Schedule
3. CUP Fee Study Worksheets
Respectfully Submitted by: Alexis Oropeza, Planning Manager
Concur: Carrie Tai, Community Development Director
Noted for Fiscal Impact: Viki Copeland, Finance Director
Legal Review: Patrick Donegan, City Attorney
Approved: Suja Lowenthal, City Manager