TITLE:
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USER FEE STUDY AND CONSOLIDATED MASTER FEE SCHEDULE
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DEPARTMENT: FINANCE DEPARTMENT
PRESENTED BY: ANNA ACOSTA-REYES, FINANCE MANAGER
CONTACT INFORMATION: ANNA ACOSTA-REYES, FINANCE MANAGER, (714) 754-5243
RECOMMENDATION:
recommendation
Staff recommends the City Council:
1. Receive the User Fee Study Report prepared by ClearSource Financial Consulting.
2. Open the Public Hearing and take testimony.
3. Adopt a Resolution of the City Council of the City of Costa Mesa, California, Updating and Establishing User and Regulatory Fees for Various City Services.
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BACKGROUND:
City staff annually reviews user and regulatory fees as part of the City’s normal course of operations. Periodically, comprehensive fee studies are performed to calculate the City’s costs of providing fee-related services. In years between studies, fees are typically adjusted by the annual change in City labor cost inflation.
The overall goal of the fees study is to update the user fees and charges to reflect the cost of providing fee-supported services and to maintain appropriate levels of cost recovery. City records document comprehensive fee reviews dating back to the early 1990s, including comprehensive reviews in Fiscal Years 1992-93 and 2006-07. In 2019, the City initiated a comprehensive citywide fee study to evaluate user fees, service charges, and development-related fees based on the reasonable cost of providing services and retained the services of ClearSource Financial Consulting to facilitate the study. As the cost of providing municipal services has increased over time, corresponding user fees have also been adjusted.
On June 6, 2023, the City Council approved the consideration of the City’s multiple existing user and regulatory fees into one schedule. Combining the City’s current fees into one master-fee and charges schedule enhances transparency and ease of use for the public when trying to ascertain the cost for City services.
On June 3, 2025, staff presented the Master Fee schedule to City Council with recommendation for cost of services adjustments to the fees. The City Council approved a 3.3% consumer price index (CPI) adjustment to city fees and a 2.7% Credit Card fee. The Council also directed staff to bring back the following items:
• Consideration of American Express as an accepted form of credit card payment and adjust the credit card processing fee accordingly.
• Direct staff to seek input from the Parks and Community Services Commission (PACS) on fees related to programs and community facility rentals, and the Finance and Pension Committee (FiPAC) on all other proposed adjustments to city fees.
Since the June 3, 2025, City Council meeting, Finance Staff has gone back the FiPAC and PACS on multiple occasions to seek their input on the Consolidated Master Fee Schedule.
City staff worked with ClearSource Financial Consulting to conduct a comprehensive fee study. The proposed fees for Council consideration as part of this agenda item are based on this recently completed user and regulatory fee study. If Council adopts the proposed fees, the updated fees will be effective upon approval, with the exception of new fees that will go into effect 60 days after approval.
ANALYSIS:
California cities and other local governmental entities periodically conduct user fee studies to recalibrate and justify fee amounts charged for services, and to optimize the overall portfolio of revenues available to the municipality to fund its services. These studies are consistent with industry practice. It enables the City to match and recover costs incurred to provide particular services and activities.
California law provides guidance regarding the amounts the City may charge for fee-related services and activities. Specifically, in order to avoid being considered illegal and unapproved taxes, the fees charged shall not exceed the estimated reasonable cost of providing the services, activities, or materials for which fees are charged.
The services for which the City imposes a user or regulatory fee typically derive from an individual person or entity’s action or request. Therefore, except in cases where there is an overwhelming public benefit generated by the City’s involvement in the individual action, a fee for service ensures that the service requester bears most, if not all, of the cost incurred by the City to provide that service. When a fee targets “100% or full cost recovery,” the service requester is bearing the entirety of the cost. When a fee targets less than full cost recovery, another City revenue source - in most cases, the General Fund - subsidizes the individualized activity.
Generally, fees for service are targeted to obtain full cost recovery, inclusive of operating, direct, indirect, and capital costs, except in cases where the City Council cites a public interest in lower fees (e.g., parks and recreation fees). The City may also be influenced by market conditions, compared to regional municipalities of similar size and service profile.
Fees examined as part of this study
Fees examined as part of this study include, but are not limited to:
• Building Fees, such as permitting of new construction or modifications to existing structures
• Planning Fees, such as entitlement review and review for compliance with the zoning code
• Public Works Engineering Fees, such as encroachment and public improvement review
• Fire Fees, such as annual inspections conducted to ensure compliance with the fire code
• Police Fees, such as vehicle impound and specialized license review
• Recreation Fees, such as requests for reserved use of City fields and facilities
Fees, Fines, and Taxes are NOT examined or updated as part of this study
Fees, fines, and taxes not examined as part of this study include:
• Assessments
• Development Impact Fees
• Fines or Penalties
• Franchise Fees
• Taxes
• Utility Rates and Services Charges
These items are subject to different approval thresholds or are not subject to the same cost of service limitations as the fees examined as part of this study. Consequently, they are specifically excluded from the scope of this study.
Overview of Findings and Recommendations
The following provides a summary of primary changes the City Council is being asked to consider as part of this study.
Fees Proposed to Decrease
Approximately 5% percent of user and regulatory fees are proposed to decrease. As aforementioned, the City periodically performs comprehensive studies to calculate the City’s costs of providing fee-related services. In years between studies, fees are typically adjusted by the annual change in City labor cost inflation. Studies, like this one, provide the opportunity to recalibrate fees to reflect current City practices and cost of service on a more refined basis. A total of fourteen fees are proposed to decrease, including those related to planning fees, cannabis permit fees, and police fees. A detailed breakdown by area is provided in the table below.
Fees Proposed to Remain Unchanged
Approximately 15% percent of fees included in the City’s fee schedule are proposed to remain unchanged. These are primarily development impact fees that are not proposed for adjustment as part of this study, and fees established by the State of California. A total of forty-two fees are proposed to remain unchanged and are in a variety of areas to include building fees, planning fees, EMS & Emergency ground ambulance Transport and Vehicle Accident Fees, police fees, animal regulation fees, city clerk fees, finance fees and recreation and facility rental fees. A detailed breakdown is provided in Attachment 2.
Fees With Changes that Vary Based on Project Criteria
Approximately 12% of fees are proposed for adjustment that varies based on project criteria. For example, some fees are based on project square footage, with lower fees applicable for smaller square footage projects, and higher fees applicable with projects with larger square footage projects. In these instances, fees may decrease, remain unchanged, or increase depending on the project criteria. There are a total of thirty-four fees with these types of changes including planning fees, engineering fees, self-haul permit fees, fire fees, emergency medical services and emergency ground ambulance transport and vehicle accident fees, police fees, animal regulation fees, and recreation and facility rental fees. A list of fees is provided in Attachment 3.
Fees Proposed to Increase
Approximately 61% of fees are proposed to increase. These are primarily fees for regulatory services (e.g., planning, building, engineering, fire code reviews), and fees for recreation services that have remained relatively unchanged since 2019. The fee adjustments will allow the City to continue to achieve cost recovery for these services. A total of one hundred and seventy-two fees are proposed to increase that span across all areas to include: building fees, planning fees, cannabis permit fees, engineering fees, self-haul permit fees, fire fees, police fees, animal regulation fees, recreation and facility rental fees. A detailed breakdown of these fees is provided in Attachment 4.
New Fees
Twenty-two (22) new fees are proposed. An overview of the proposed fees is included in the list below:
Similar fees are collected by communities throughout the region and the State. The proposed fee amounts do not exceed the City’s cost of service and are in-range of amounts charged by other jurisdictions. Below highlights information for some of the new fees that are being proposed as part of the Master Fee schedule.
• Development Technology Fee will assist in capturing costs associated with the implementation, enhancement, management and maintenance of the City’s software platform and technology. The fee will be used to support maintaining and enhancing the City’s eServices (electronic) platforms, ensuring better service for the public and fostering improvements in the interconnected services and business operation across departments. This fee will apply to building, planning and fire permits.
• General Plan Update Fee: This fee is proposed to offset a portion of the periodic costs associated with General Plan and supporting document updates. Adopting a General Plan Update fee allows staff to reserve amounts collected and use them to offset costs that may be incurred from time to time. In order to maintain alignment with the region, staff proposed less than full cost recovery for this fee. The proposed fee will be collected as 5% of applicable permit fees. The fee will only be paid by construction projects that make use of the City’s General Plan and related documents in order to determine whether the project can be constructed (e.g., new construction).
• Pre-Construction Meeting: This fee will offset the costs when applicants request this service. This includes an informational meeting at a job site that involves multiple department involvement.
• Temporary Certificate Occupancy: This fee will offset the costs associated with a temporary certificate of occupancy which allows the occupation of sites before final approvals are obtained.
• Work without Permit or Work Outside Scope of Permit: This fee will offset the costs associated to the review of any unpermitted work or any work outside the approved scope with requires additional staff services.
• Code Enforcement Re-inspection fee: This fee will cover costs associated to the Code-Enforcement violations are re-inspected and inspection is failed. If the re-inspection is passed, then the fee will not apply.
• Animal Regulation fees for potential dangerous or vicious Animals: This fee will cover costs associated with hearing and appeals in regards to animal control officer investigations. The fee is determined by the hearing and/or appeal process.
Commission and Committee Review
Parks and Community Services Commission: Staff, in coordination with the Consultant ClearSource, presented the Cost of Service Study and proposed adjustments to Recreation fees in the Master Fee Schedule to the City’s Park and Community Services Commission on May 21, 2026. At that meeting, the Commission directed staff to re-evaluate most of the fees and the magnitude of the proposed increase. On July 22, 2026, staff and ClearSource returned to the Commission with a revised schedule reflecting the updated fee recommendations. The Commission subsequently approved the attached Recreation fee adjustments for inclusion in the Master Fee Schedule.
Finance and Pension Advisory Committee: On July 15, 2026 staff along with Consultant (ClearSource) reviewed the Cost of Service Study and the proposed Master Fee schedule adjustments with the Finance and Pension Advisory Committee (FIPAC). Members expressed general support for the principle of cost recovery but emphasized the need to evaluate process efficiencies and technology improvements. Discussion included opportunities to simplify permitting processes, reduce unnecessary administrative steps, and improve customer experience for homeowners and businesses.
The Committee reached consensus to provide feedback to staff and the City Council supporting the general premise of cost recovery for user and regulatory fees, while recommending continued consideration of process improvements, operational efficiencies, and impacts on residents, businesses, and development.
ALTERNATIVES:
City Council alternatives include:
• Do not adopt proposed fee adjustments.
• Approve any combination of partial implementations of the proposed changes.
FISCAL REVIEW:
The anticipated fiscal impact of the proposed fee changes is $1,075,000 annually in additional revenue to the General Fund (Fund 101), of which $865,000 generated from citywide fees and $210,000 from adjustments to recreation fees. It is important to note that while adjusting fees and billing rates will provide a fiscal impact in the form of additional revenue; the revenue is not intended to be used to fund new services, but rather to offset the costs of providing existing services that are recoverable from fees. Further, fees may only recover the reasonable cost of providing services and cannot exceed that cost without becoming a tax. Authorizing an annual inflationary adjustment to fees allows the City to better recoup its costs and ensure the sustainability and deliverance of a wide range of services to the community.
LEGAL REVIEW:
The City Attorney has reviewed this agenda report and resolution and approves them as to form.
CITY COUNCIL GOALS AND PRIORITIES:
This item supports the following City Council Goal:
• Achieve Long-Term Fiscal Sustainability
CONCLUSION:
Industry best practices and California statutes are in harmony: User and regulatory fees should be set according to the estimated reasonable cost of service and should bear a fair and reasonable relationship to the payer’s burdens on, or benefits received from the activities and/or services provided by the City. Additionally, ongoing review and adjustment of fees provides multiple benefits, including:
• Increasing the availability of General Fund revenues to be used for services and activities available to all Costa Mesa residents and businesses, such as public safety and parks services.
• Keeping pace with general cost inflation.
• Avoiding fee spikes that are more likely to occur when municipalities leave fees unchanged for a multi-year period.
• Providing fee payers, City Staff, and City policymakers with a pattern of consistency that provides information for forecasting and decision-making purposes.
• Helps meet fee-payer service level expectations by collecting fees to fund the existing level of services provided.
• Encouraging generational equity among fee payers by avoiding long-term stagnation of fees followed by significant fee increases.
Approve staff recommendations as outlined on page one.