The City provides a variety of services that benefit a specific customer or user. In accordance with State law, the City is legally allowed to charge the user of the service a fee to recover the cost of providing the service.
In order to determine the cost of providing services, the City hired Revenue and Cost Specialists, LLC ("RCS") to complete a cost of services study (“Study”). The Study also identified options to adjust fees in order to more equitably finance services.

The Study looked at the fees charged by various departments, including community activities. During this time, a new special event policy was being developed. As such, the discussion on special event fees was deferred until a later date. As staff are on the cusp of preparing for the second year of the special event grant cycle, it is an appropriate time for Council to provide direction regarding the special event fees as such guidance may affect the special event policy and its associated grant program.

The basis for Council’s direction regarding fees centers on its overall philosophy regarding special events and whether applicants should pay the full cost of the service. Some services are considered to be “personal choice services” as the individual decides on whether to undertake the activity that generates the fee, such as having a special event on the beach, and the service, such as issuance of a permit, may be withheld if payment by the applicant is not received. However, Council may determine that a service has a community (public) benefit, as compared to benefiting the specific user (private sector). As such, Council may direct that the fees be subsidized by other City general fund revenues instead of the user bearing the full cost of the service. Staff seeks direction from Council regarding special event fees.

Special Event Objectives
As Council considers possible adjustments to the special event fees, it is useful to first discuss its philosophical approach to special events and cost recovery. In considering fees, the following policy questions emerge:

1. Community-wide benefit or special service: Does the special event benefit the applicant and thus the applicant should pay all of the City’s fees? Or, is there a community-wide benefit of the event and thus the fee should be subsidized, in whole or in part, by other City taxes?
2. Service recipient or driver: The special event permit fees are intended to recover the cost of staff time for reviewing and processing the permit. The purpose of the review is to ensure the event meets City requirements in order to mitigate the impact of the event on the community and to help promote a safe and enjoyable event. While one may assert that the community benefits from events that are permitted (and are considered to be the service recipient), one may also contend that the special event is the driver of the cost and thus should pay the City cost for permitting.
3. Service demand: The amount of the fee may affect the demand. Will the amount of special event fees charged increase or decrease the number of special events, including the use of the beach and parks?

Special Event Fees
As part of the Study, RCS interviewed staff to ascertain the amount of time it takes to complete tasks associated with a specific service; calculated the cost of staff and allocated the cost to the activity being performed; examined the current fees being charged for services; and made recommendations regarding adjustments to fees to capture the actual cost of service.

As described below, many of the special event fees have two components: (1) the actual cost to the City, be it the cost of staff to process a permit and/or the actual cost of special event items like barricades and traffic delineators that staff have determined to be necessary for a safe event and (2) the cost for exclusive use of a City asset, be it the beach, park or road. The first component of the fee is based on the Study while the second part is discretionary. This component may be based on such factors as the market; the price the applicant is willing to pay for the use; the price of private sector alternatives and/or the possible cost incurred by the City should the asset be damaged. The proposed fees recommended by the Study, as well as some staff-generated options, are included for discussion. However, staff seeks direction on the policy regarding cost recovery of special event fees at this time and will bring forth an actual fee schedule for consideration and adoption at a later time.

Beach and Park special event fees
The City currently charges fees for a private event on the beach and at City parks. The processing fee for these permits is currently $155 per application. Based upon the fully burdened cost of community activity staff and the average time it takes to process permits, the Study recommended the processing fee be increased to $685 per application. If the goal is to recover the full cost of service from the applicant, then the fee should be adjusted to $685. It is worth noting that the staff time and cost is actually likely to be greater than this amount as the Study did not include the costs of other City staff that are also involved in reviewing and processing these permits, such as the Library and Community Activities Director or the Public Safety Director (or other designated public safety staff). Moreover, staff anticipates that additional time is likely to be allocated to permit processing given the increasing importance of ensuring the safety of events. The Study also recommended that an additional $170 be charged to an applicant for the processing costs related to the event serving alcohol in the park.

In addition to the processing fee, a beach special event fee includes a rental fee of $400 per hour, plus a refundable $200 damage deposit. Similarly, the park special event fee includes a rental fee of $400 for the first four hours, then $300 per hour and a refundable damage deposit of $350. The Study did not recommend any adjustments to this part of the fees. These fees (permit, rental and deposit) do not distinguish between public or private events nor do they tier the fees based on other criteria.

Staff does not recommend that the refundable damage deposits be reduced or subsidized. Rather, staff recommends this amount be increased (and the same amount for both the beach and parks) due to the potential cost the City would incur for damage of these community resources. Staff requests concurrence by Council to come back with options to increase this part of the fee. While Council has discretionary regarding the amount of all fees, the rental fee for the beach and parks is most malleable. Depending on Council’s cost recovery goals, it could increase the processing fee as recommended by the Study (as this is an actual cost to the City) and simultaneously reduce the rental fee as an option to achieve a more equitable cost recovery.

Film and sound permits
The current cost for a permit to film within the City is $266. The Study recommended the cost be adjusted to $405 per permit, based on the time and cost for review by police and community activities staff. The amount of the fee again is based upon Council’s cost recovery goals. Depending on Council’s goals for promoting filming within the City, it may opt to reduce film permits for all, or some, type of filming activities. Council also has the option to support filming organizations through the discretionary grant process and/or through its marketing efforts in addition to, or instead, of through subsidizing the cost of film permit. The City also charges $25 for a sound permit. This amount was adopted by Council in 2011, based on similar fees in other jurisdictions. This fee was not reviewed as part of the Study. Staff recommends this fee remain at $25 at this time.

Special event in the public right-of-way (ROW)
The current fee for a special event in the public ROW is $365 per block. While residents must still comply with City rules and requirements such as insurance, there is no charge for processing of a street closure for neighborhood functions. This fee, by default, includes a subsidy for neighborhood functions. In addition, fees are charged for the off-duty use of police and public works staff for special events. The Study reviewed the amount of time spent by community activities and police staff and recommended adjusting the fees based on the event being categorized as small, medium or large.

However, staff does not recommend basing costs on the size or type of event. Rather, staff recommends that the fee be the same for processing an event within the ROW as a beach or park special event, with the additional fee for a street closure as applicable. In addition to allowing for consistency, the size of the event does not necessarily dictate the time involved in processing a permit, as many other factors, such as the responsiveness of the event organizer, the complexity of the event and safety protocols influence the permitting process. In addition, staff recommends that the City determine the appropriate number of police and other employees necessary for an event and that the applicant be charged the fully allocated rate of the City staff assigned to the event. This applies to all private events, although events within the ROW tend to require additional City resources compared to other events.

Other fees
In addition, the City charges for the actual cost of supplies related to the event like no parking signs ($3 each), traffic cones ($3 each), A Frames ($25 each), and barricades ($65). These costs were not examined as part of the Study as they are considered a pass-through cost. As these are required supplies to meet City rules and safety requirements, it is recommended that the City either pass through the actual cost of these, and any new items like bollards, to the applicant or allow the applicant to procure these items elsewhere as long as the number and type of items comply with City requirements.

Street Closure
The Study also recommended that events with a road closure be charged $935, which reflects the cost of staff time necessary to receive approval from the Community Activities and Cultural Commission and Council. Currently there is no fee for these ancillary services. Staff recommends that a fee be charged for street closures due to the time involved in both (1) receiving the approval from Council and (2) working with the applicant on the noticing and actual street closures before and during the day of the event.

Parking stalls
The City currently charges for the use of parking stalls, which currently is $100 for each stall except for certain special events which increases the cost to $200 for each stall. There is a two stall minimum for valet parking stalls during Car Week, PGA Golf event and the last two weeks in December at a cost of $200. These fees were set in 2011, and updated in 2014 to reflect inflationary costs as determined by the consumer price index at that time. The Study did not recommend any adjustments to the fee except that the fee be applied to the use of the Del Mar parking lot (at $100 for each parking stall per day). Staff concurs that Del Mar parking lot should be subject to the same fees as parking stalls in the commercial district.

Policy Considerations and Recommendations
Staff seeks guidance regarding Council’s special event fee objectives and cost recovery approach. While Council has the final decision regarding special event fees, staff recommends a fee schedule that is simple to assess and collect and easy for applicants and the public to understand. The development of criteria will enable staff to apply fees consistently and equitably to all special event applicants.

Council direction focuses around three primary options:

1. Affirm the current fee schedule.
2. Adjust the fees as recommended by the Study and/or staff.
3. Adjust the fees as recommended by the Study and/or staff with a subsidy for all, or some, of the fees.

The current fee schedule is outdated and, keeping the fees intact, is in actuality, continuing the existing subsidy that exists within the fee structure. If Council seeks to subsidize special event fees due to their public, or community-wide benefit, staff recommends that Council consider a new methodology for the fee subsidy and base any subsidy on the recommended fees presented within the Study.

During various public workshops and meetings on the Study and associated fees, suggested criteria for a fee schedule included:

1. If the applicant is a resident or non-resident
2. If the event is new or reoccurring
3. If the event sponsor is a non-profit or for profit entity
4. If the event is free and open to the public
5. The number of people attending, the size and/or complexity of the event
6. The purpose of the filming such as for educational purposes or marketing of the City as a visitor destination

Of the options presented above, the status of the event sponsor as a non-profit entity is easier for staff to determine and consistent with the criteria to be eligible for a special event grant. Should Council use this as a criteria, it will also need to determine: (1) which fees to subsidize and (2) the percentage, or amount of the fee to subsidize. Once Council has provided direction regarding its philosophy on the fees, staff will return with actual dollar amounts for the various fees for Council’s consideration.