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AGENDA ITEM
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: MARCIE MEDINA, DIRECTOR OF FINANCE
VIA: RICK COLE, CITY MANAGER _C__
DATE: MAY 21, 2001 / —
SUBJECT: PROPOSAL FOR COST ALLOCATION PLAN AND USER FEE STUDY
RECOMMENDATION
It is recommended that the City Council approve the proposal submitted from Revenue Cost
Specialists, LLC for the Cost Allocation Plan and User Fee Study and appropriate an amount not
to exceed $41,000.
BACKGROUND
The City is currently using the cost allocation plan prepared by DMG-MAXIMUS in 1994. This
plan has never been updated and has created problems with full recovery back to the General
fund for support and overhead costs. The City's user fees have been revised from time to time
based on CPI.
The cost allocation plan will be compliant with OMB Circular A-87, this will allow the City to
maximize cost recovery from federal and state grants, SB 90, CDBG, gas tax, etc. The cost
allocation plan will provide an external and objective method for the internal charging, or
allocation of costs to the special revenue and enterprise funds.
Without an updated cost allocation plan, charges to the City's enterprise and special revenue
funds may be understated. The City's fees and charges most likely do not include all applicable
costs and we may not be recovering the true cost of providing the service. Or, we may be
inadvertently overcharging. In either case the City needs be able to defend and explain the basis
for its fees and charges.
Proposals were requested and DMG and Revenue Cost Specialists responded. �/
Revenue Cost Specialists $ 41,000 (/C
DMG-Maximus $ 51,500 ' 1 '
07h/
•
In addition to Revenue Cost Specialists being the low bid, they also include the software and
training that will allow staff to keep the study current and avoid costly updates in future years,
whereas, DMG recommends that the City contract with them to do updates every couple of
years at a cost of $15,000 to $ 20,000 per update.
FISCAL IMPACT
The fees for this study will be recovered through user fees, grant funds and cost allocation
calculations.
• j
Revenue
Cost
Specialists, LLC
Serving Local Governments Since 1975
April 2, 2001
City of Azusa
Finance Department
213 E. Foothill Blvd.
Azusa, CA 91702
IN RE: Request For Proposal -- Cost Allocation and User Fee Studies
Revenue & Cost Specialists (RCS) believes that it is uniquely qualified to perform the services
requested by the City. RCS has analyzed the costs of services for over a hundred cities in five
states over twenty years. Also, when checking references,please notice that in 1997 we changed
our name from Management Services Institute (MSI)to Revenue& Cost Specialists,LLC.
RCS proposes to perform the requested Cost Allocation Plan and User Fee Study in a professional
and expedient manner using only firm principals.
If there are any questions, contact me at (714) 992-9027. RCS would appreciate the opportunity
to be of service to the City of Azusa.
Sincerely,
1
Eric S. Jlil ,son
Vice President
Internet www revenuecost.com
Voice 714.992.9020 2545 E.-Chapman Avenue• Suite 103 • Fullerton, CA 92831 Fax 714.992.9021
PROPOSAL
SCOPE OF WORK
Revenue & Cost Specialists (RCS) proposes to prepare a Cost Allocation Plan and Fee Study for
the City of Azusa to allow the City to identify and recover all of the costs allowable. To do so
RCS proposes to perform the following services for the City of Azusa:
Indirect Cost Allocation Plan. RCS proposes to utilize a Windows-based copyrighted software
program to prepare the City's cost allocations. RCS would:
• Prepare two types of cost allocations. One that will include all costs allowable for
use with the fee study and one that follows the guidelines of the Federal A-87
process for use with grant and reimbursable programs.
• Use the "simultaneous equations" method for computing cost allocations for all
City departments, divisions, programs, and/or services.
• Use the costs calculated from the Cost Allocation Plan for the distribution of
general City indirect costs to the City Budget and to the "end-user" services in the
User Fee Study. This would also include overhead costs for water and sewer and
will be in compliance with Proposition 218.
• Turn over the software, if the City chooses that option, and workpapers to the City
at the conclusion of the project along with a license to use the software in
perpetuity and training in its use. There will be no additional charges for technical
support.
Comprehensive User Fee Study. RCS proposes to utilize its copyrighted Municipal Business
System which uses a Windows-based stand-alone program to calculate the full-business cost of all
current fee and potential fee services provided by the City. RCS would:
• Conduct a seminar with City staff explaining the operational methodology of the
study and the role of City staff.
• Interview City staff to identify "end-user" services which could be charged for but
which are currently provided for free and develop a service unit statistics list.
• Interview all departments providing "end-user" services to insure that costs from
all departments directly involved with a service are included in the cost of that
service.
2
City of Azusa - Fee Study and Cost Allocation Study Request For Proposal
• Use the costs calculated from the above Cost Allocation Plan for the distribution
of general City and departmental indirect costs to each "end-user" service.
• Prepare a draft report that identifies the total costs and revenues for each service,
the current fees, and makes fee recommendations for each service presented.
• Based on staff and/or Council input, prepare a final report, which will have
recommendations for new fees and subsidy percentages and projections of new
revenues from those fees. All recommended fees will be in compliance with
Proposition 218.
• Assist the Council in the review and adoption of revised service fees and subsidy
percentages and assist the staff in the implementation of the revised service fees at
up to three meetings.
• Train City staff in the use of the copyrighted and computerized Municipal Busines s
System, if the City chooses that option, which staff can use to update the fees and
perform "what if" analyses on services. Staff automatically becomes a member of
the RCS MBSystem User Group. All workpapers and source documents will be
provided to the City at the completion of the project.
SOFTWARE
RCS uses its copyrighted Windows-based software for both the Cost Allocation Plan and the User
Fee Study. It is this software that will be turned over to the City at the conclusion of the project
and training provided at that time.
The City can download a demonstration copy of the software at www.costallocation.com.
Additionally, RCS commits as a firm to making our clients independent of consultants for
updating the results of our reports. We have an active user group, an active group of city staff
responsible for updating their service costs, and RCS has committed to its user group that any
improvements in our software will be provided at no cost or nominal cost to our licensed users.
3
City of Azusa - Fee Study and Cost Allocation Study Request For Proposal
TIMING OF SERVICES
Work would begin immediately on notification by the City. RCS proposes to complete the work
based on the following schedule:
WEEK WORK
COST ALLOCATION PLAN:
1 Identify subpools and allocation factors and allocate staff time to subpools
3 Complete collection of allocation factors and allocation of staff time
4 Provide City staff with a draft of the Cost Allocation Plan and make
necessary adjustments as required
6 Provide final Cost Allocation Plan
USER FEE STUDY:
8 Complete the identification of services and departments providing those
services
8 Initiate interviews of staff for service times
12 Complete the collection of service statistics
14 Complete interviews of staff for service times
16 Provide service cost and revenue sheets with fee recommendations and
review with staff
20 Provide five copies of a draft report with text to City staff for review
22 Provide the City with twenty-five copies of the final report
23 Present final report to the Council at up to three meetings
The above schedule is comfortable. However, if the City wishes to speed up or slow down the
process, that can be done.
FEE FOR SERVICES
Basic Fee. The basic fee for RCS to perform the above tasks is as follows:
Cost Allocation Plan $8,000
User Fee Study $24,000
Windows-based Municipal Business System Software and Training $8,000
(Plus Sales Tax on $6,500 = $503.75)
Additionally, RCS will invoice the City separately for the following out of pocket costs to a
maximum of$500, as follows:
- Non-commercial car mileage will be charged at $0.32 per mile;
4
City of Azusa - Fee Study and Cost Allocation Study Request For Proposal
- Mail charges as incurred.
The above fees cover all costs except the following additional costs which the City may incur:
• any business license tax imposed on RCS which is not waived by the City,
• insurance coverage beyond our basic general liability and workers compensation
requiring an additional premium',
• sales or use tax or any other tax imposed on these fees, and
• report reproduction beyond the proposed numbers of copies of the final Reports.
RCS will submit five equal invoices plus any miscellaneous costs from the previous paragraph.
The first invoice will be submitted ten days after notice to proceed. Each invoice will be due
within 30 days of submission. Subsequent invoices would be submitted each month following.
Should the report be completed and presented to the City Council prior to the end of the billing
schedule, all remaining invoices would be due and payable. The software will be billed in one
invoice after the software has been installed at the City.
Term of Offer. These prices and the Proposal will be honored until June 30, 2001.
'RCS standard coverage includes workers compens ation pursuant to state law,comprehensive liability insurance with a minimum combined
single limit coverage of$1,000,000 and professional liability insurance with a minimum coverage of$1,000,000 per occurrence.
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City of Azusa - Fee Study and Cost Allocation Study Request For Proposal
PROJECT STAFF
Our professional qualifications are attached hereto as Appendix A. Only firm principals will be
involved in the project, as listed below.
Rick Kermer, CPA. President
Scott Thorpe, Senior Vice President
Owen Olsen, CPA. Vice President
Eric Johnson, Vice President
REFERENCES
We have completed similar projects for the jurisdictions listed in Appendix B and would request
you to contact them for references. A more extensive and specific list can be provided on request.
Please also see listings on individual professional resumes.
CONCLUSION
RCS looks forward to being of assistance to the City of Azusa in identifying and allocating its
costs.
END
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APPENDIX A
RESUMES
s <
ALBERT RICHARD ("RICK") KERMER,JR.
EDUCATION
Bachelor of Arts -University of Chicago-Economics
Master of Business Administration - University of Chicago-Accounting and Math Methods/Computers
PROFESSIONAL CERTIFICATION
Certified Public Accountant, State of California
PROFESSIONAL EXPERIENCE
Revenue&Cost Specialists/Management Services Institute - President
(1979-Present)Chief Executive Officer of a diversified management services company.
City of Buena Park-Director of Finance/City Treasurer
(1976-1979)Managed a department responsible for administering the budget and general accounting plus
water billing, treasury management, business licensing and data processing of a full-service city.
Developed and implemented an integrated on-line financial and program budgeting system. Prepared
City's first Annual Financial Report for FY 1978-79 which received a CSMFO Meritorious Award.
Municipal Finance Consultant, Lecturer and Author
(1976-Present) Performed accounting and financial assistance to numerous municipal governments.
Assisted redevelopment agencies, housing authorities, and other specialized districts. Provided
contractual accounting services to cities including service as Acting Controller of Compton.
Lecturer on governmental accounting,budgeting,cost accounting and risk management at the University
of Southern California. Speaker at several League of California Cities meetings on risk management and
cost accounting. Co-author of several articles on risk management published by the Municipal Finance
Officers Association and Western Cities magazine. Co-author of the League of California Cities
publication, Cost Accounting for California Cities.
City of Lynwood-Fiscal Officer
(1975-1976)Created Finance Department. Established centralized purchasing and review of accounts
payable. Administered risk management program. Organized utility billing system for accounting control
and follow-up on delinquents.
Lance,Soil& Lunghard,CPAs-Senior Auditor
(1971-1975) Audited the Cities of Bell, California City, Claremont, Costa Mesa, Duarte, El Monte,
Lynwood, Montclair, Oxnard, Rialto, San Dimas and Whittier. Recommended warrant processing and
receipting procedures. Reviewed internal control and recommended changes to strengthen same.
Prepared annual financial reports and monitored adherence to generally accepted accounting procedures.
Publications:
Co-Author of Cost Accounting for California Cities, League of California Cities, 1981 Sacramento, CA
ALBERT RICHARD ("RICK") KERMER,JR.-(continued)
CLIENTS SERVED
SERVICE COST STUDIES SERVICE COST STUDIES(cont)
City of Alhambra City of Sierra Madre
City of Banning City of Solana Beach
City of Big Bear Lake City of South Gate
City of Brea City of South Lake Tahoe
City of Carlsbad City of Thousand Oaks
City of Carpinteria City of Tulare
City of Ceres City of Turlock
City of Chino City of Upland
City of Claremont City of Villa Park
City of Coachella City of Vista
County of Contra Costa City of Westminster
City of Corona City of West Jordan,Utah
City of Cudahy
City of Dinuba COST ALLOCATION PLAN
City of Dublin,Ohio City of Alhambra
City of Folsom City of Buena Park
City of Fontana City of Carlsbad
City of Foster City City of El Cajon
City of Fullerton City of Lynwood
City of Goodyear,Arizona City of Rialto
City of Hemet City of San Rafael
City of Highland City of Solana Beach
City of Huntington Beach City of Thousand Oaks
County of Imperial •
City of La Mirada CASH MANAGEMENT
City of La Palma City of Buena Park
City of Lake Forest City of Commerce
City of Lemoore City of Compton
City of Lindsay La Mirada Civic Theater
City of Los Altos City of Palmdale
City of Lynwood
City of Mammoth Lakes ACCOUNTING PROCEDURES
City of Marina City of Buena Park
City of Merced Commerce Redevelopment Agency
City of Milpitas City of Compton
City of Monrovia City of La Habra
City of Monterey City of La Palma
City of Moreno Valley City of Morgan Hill
City of Morgan Hill City of Palmdale
City of Norwalk South Gate Housing Authority
City of Oakdale
City of Oceanside DATA PROCESSING
Oceanside Harbor District City of La Palma
City of Palmdale Ontario-Montdair School District
City of Palm Desert City of Palmdale
City of Pasadena City of San Clemente
City of Pittsburg City of South Gate
City of Pomona City of Villa Park
City of Port Hueneme
City of Rancho Cucamonga ORGANIZATIONAL AND MANAGEMENT
City of Rancho Palos Verdes City of La Mirada
City of Red Bluff Ontario-Montclair School District
City of Redlands City of South Gate
City of Rialto City of Vista
City of Richmond
City of Riverside UTILITY RATE STUDIES
City of Rocklin City of Brea
City of Salinas City of Chino
City of San Clemente City of El Segundo
City of San Juan Capistrano
City of San Rafael LONG RANGE FINANCIAL PLAN
City of Sanger City of Chino
City of Santa Clarita City of Cudahy
City of Scotts Valley City of Lake Elsinore
City of Seal Beach City of South Gate
City of Selma City of Hesperia
City of Turlock
•
,
SCOTT IAN THORPE
EDUCATION
Bachelor of Public Administration-San Diego State University
Master of Public Administration-California State University Fullerton
PROFESSIONAL EXPERIENCE
Revenue& Cost Specialists/Management Services Institute-Senior Vice President
(1985-Present)Principal in a municipal management services company providing diversified financial services.
City of Brea-Management and Budget Manager
(1984-1985)Responsible for development of budget preparation and management information reporting systems.
Created and established a 50-workstation personal computer operation from acquisition, placement, and
maintenance of all equipment to initial and on-going training. Created a comprehensive legislative program for
reviewing all federal, state, and local legislation.
City of Anaheim-Management Auditor
(1979-1984)Assisted in the preparation of$350,000,000 annual budget. Provided centralized management
support and assistance of line departments with a variety of services including work measurement and
management techniques program development,productivity improvement, internal management audits,budget
review/analysis, revenue forecasting and auditing, data processing systems development. Specialized in
management assistance to stadium, convention center, and golf operations. Responsible for fiscal and
management training sessions required of all city management staff.
City of Covina-Administrative Assistant to the City Manager
(1974-1979) Performed general program development with significant emphasis on the improvement of the
budget, legislative, public information, and agenda process systems. Conducted major annexation study and
effort.
City of Chula Vista-Administrative Aide
(1973-1974)Completed City-wide Policy and Procedure Manual. Conducted operation reviews of long term
fire vehicle equipment purchases and of the municipal bus system.
OTHER ACCOMPLISHMENTS
ABC Elementary School District Closure Project-Enrollment Projections
Charter Oak Unified School District Closure Committee-Board Appointee
Lecturer on various municipal govemment/management topics.
PUBLICATIONS
"Financing Capital Improvements", Journal American Water Works Association, August, 1991, pages 50-52
"Impact Fees: Practical Guide for Calculation and Implementation",Journal of UrbanPlanningand Development,
Vol. 18, No. 3, September, 1992, pages 106-118
SCOTT I. THORPE
(continued)
CLIENTS SERVED
DEVELOPMENT IMPACT FEES MBSYSTEM COST STUDIES(Cont.)
City of Upland,CA
City of Barstow,CA City of West Covina,CA
Brigham City Corporation,UT County of Ventura,CA,Fire District
City of Carpinteria,CA County of Imperial,CA
City of Chino,CA
City of Coachella,CA MBS SOFTWARE INSTALLATION/TRAINING
City of Corona,CA City of Bend,OR
City of Folsom,CA City of Kennewick,WA
City of Gilroy,CA,Review of Existing DIFs City of Taft,CA
City of Hemet,CA
City of Highland,CA MASTER FACILITY PLANS/CIPS
City of Lake Havasu City,AZ City of Big Bear Lake,CA(5/10 year)
City of Lemoore,CA Brigham City Corporation,UT
Town of Mammoth Lakes,CA City of Carpinteria,CA
City of Morgan Hill,CA ' City of Chino,CA
North Ogden City,UT City of Corona,CA
Town of Paradise,CA City of Folsom,CA
City of Reedley,CA City of Highland,CA
City of Rialto,CA City of Lake Havasu City,AZ
City of Riverside,CA,City-wide Town of Mammoth Lakes,CA
City of Riverside,CA,Fire Services North Ogden City,UT
City of Riverside,CA,Parks&Operations Services Town of Paradise,CA
City of Sedona,AZ City of Sedona,AZ
City of Selma,CA City of Selma,CA
City of Sierra Madre,CA South Jordan City,UT
SANBAG South Ogden City,UT
County of San Bernardino,CA City of Tracy,CA,Public Facilities
City of Scotts Valley,CA West Jordan City,UT
South Jordan City,UT
South Ogden City,UT
City of Tracy,CA,Public Facilities MISCELLANEOUS PROJECTS
West Jordan City,UT City of Azusa,CA-Bldg.Plan Check/inspection Process Review
City of Tulare,CA City of Colton,CA-Utilities Collection Procedural Manual
City of Fontana,CA-General&Departmental Overhead Plan
MUNICIPAL BUSINESS SYSTEM COST STUDIES City of Hemet,CA-Supplemental DIF-Public Peril Report
City of Azusa,CA City of Highland,CA-Capital Financing Plan
City of Banning,CA City of Highland,CA-Fee and Rate Schedule
City of Brea,CA City of Lake Havasu City,AZ-Capital Financing Plan
City of Bend,OR Los Angeles Fire/Police Retirement System-Fiscal Review
City of Carpinteria,CA City of Redlands,CA-Corp.Yard Debt Financing Cost Dist.
City of Carson,CA City of Redlands,CA-Solid Waste Collection/Landfill Rate Study
City of Chino,CA City of Redlands,CA-Street Sweeping Rate Study
City of Corona,CA City of Port Hueneme,CA-Revenue Search
City of Cotati,CA San Bernardino County,CA,Special Dist.Office,Finance Review
City of Fontana,CA South Lake Tahoe,CA-Transfer of Custody Cost Verification
City of Hesperia,CA Town of Windsor,CA-Long Range Capital Financing Plan
City of Highland,CA
City of Kennewick,WA
City of Lake Elsinore,CA MUNICIPAL CODE REVIEWS
City of Long Beach,CA,Marine Bureau City of Milpitas-Business License Ordinance Review
City of Lynwood,CA City of Pico Rivera-Business License Ordinance Review
City of Ontario,CA,Fire Department
City of Porterville,CA
City of Rancho Mirage,CA INTERNATIONAL MANAGEMENT TRAINING
City of Redlands,CA Slovenia Ministry of Local Affairs(municipal services)
City of Rialto,CA Philippine Ministry of Economic and Capital Development
City of Rocklin,CA
City of Shafter,CA
South Jordan City,UT
City of Taft,CA
OWEN 0.OLSEN
EDUCATION
Bachelor of Arts- University of California at Los Angeles
Accounting,Auditing and Taxation -U.C.L.A. Extension
Accounting and Law- Florida Southern College-Lakeland, Florida
PROFESSIONAL CERTIFICATION
Certified Public Accountant-California
PROFESSIONAL EXPERIENCE
Revenue&Cost Specialists/Management Services Institute -Partner
(1981-Present) Providing financial and accounting type services for municipalities, counties and special
districts.
Certified Public Accountant
(1980-1981)Consulting accounting services for the cities of Costa Mesa,Duarte,La Mirada, Palmdale,and
South Gate Housing Authority; audited Central Basin Municipal Water Districts; audited Southeast
Recreation and Park District for the cities of La Mirada and Norwalk;performed services for the Retirement
Plan for Safety Employees of the City of Costa Mesa; compiled financial statements for corporations,
partnerships and sole proprietorships; prepared tax returns for corporations (profit and non- profit),
partnerships,estates(Form 706 and 1041)and individuals;represented clients before the Internal Revenue
Service, Board of Equalization, Franchise Tax Board, County Property Tax Assessments,as well as other
related services.
Lance, Soli& Lunghard-CPA
(1967-1980) Supervised audits, prepared financial statements and provided management services to
various-sized cities, special districts and authorities; provided accounting and tax services for diversified
corporations, partnerships, estates,and individuals.
Alert Refractory Corporation, Florida
(1965-1967)Managed corporate finances for three interrelated corporations that performed contract work
in Alabama, Florida, Georgia, North Carolina, Illinois, Louisiana, New Mexico, and Canada.
Mentor Engineering Corporation, Florida-Treasurer
(1961-1965) Managed corporate finances for an engineering corporation that serviced aerospace and
defense industries clients. A security clearance was required.
State of California-Disability Insurance Officer
(1957-1961)Claims Examiner for the Department of Employment.
•
OWEN 0. OLSEN
CLIENTS SERVED
GANN APPROPRIATION LIMIT Highland
CITIES/TOWNS Lake Forest
American Canyon Murrieta
Avalon Santa Clarita
Azusa Yucca Valley
Banning
Bell Gardens MUNICIPAL BUSINESS SYSTEM COST STUDIES
Carson City of Hollister
Chino City of Norwalk
Chula Vista City of Pomona
Compton City of Rancho Palos Verdes
Coronado City of Seaside
Cotati City of Stanton
Cypress City of Tracy
Del Rey Oaks Town of Truckee
Fontana County of Contra Costa
Hawthorne County of Imperial
Irwindale
La Mirada DEVELOPMENT IMPACT FEES-AB 1600
La Palma City of Chino
Lake Forest City of Hemet
Lincoln City of Palmdale
Lynwood
Mammoth Lakes FINANCIAL ACCOUNTING
Marina City of Coachella and Coachella CRA
Montclair City of Compton and Compton CRA
Morgan Hill City of Cudahy and Cudahy RDA
Pacific Grove City of Fontana
Palm Desert City of Garden Grove(Contribution In-lieu for Street Damage)
Pismo Beach City of Hawthorne and Hawthorne RDA
Rancho Mirage City of La Mirada and La Mirada RDA
Redlands City of La Palma and La Palma CDC
Rocklin City of Morgan Hill
Sand City City of Pacific Grove
Santa Clarita City of Rialto
Santa Monica City of South Gate
Solvang City of Taft and Taft RDA
Truckee City of Westminster
SPECIAL DISTRICTS San Bernardino County City Managers(Booking Fees)
Carpinteria Sanitary District
Cypress Parks&Recreation District AUDITING
San Bernardino Mtn.Comm.Hospital District
Summerland Sanitary District City of Arcadia
City of Bell
BOND ISSUES-CASH FLOWS City of Bellflower
City of Banning City of California City
City of Big Bear Lake City of Claremont
City of Chino and Chino RDA City of Costa Mesa
City of Coachella and Coachella RDA City of Covina
Cudahy RDA City of Duarte
City of El Segundo City of El Monte
City of Fontana City of Fillmore
City of Hawthorne City of Huntington Park
City of La Mirada and La Mirada RDA City of Lynwood
La Palma CDC City of Montclair
City of Redlands City of Oxnard
City of Taft City of Rialto
Visalia RDA Central Basin Municpal Water Dist.
Central&West Basin Water Replenishment Dist.
HOUSING AUTHORITY-SECTION 8 County of Los Angeles-San Dimas Civic Center Authority
City of Hawthorne El Monte Chamber of Commerce
City of South Gate Glendora Library Authority
City of Norwalk La Habra Heights Mutual Water Co.
Lynwood Chamber of Commerce
NEWLY INCORPORATED CITIES/TOWNS- San Dimas-Laveme Recreational Authority
PROPERTY TAX TRANSFERS South East Recreation&Park District
American Canyon
Calimesa
Canyon Lake
ERIC S.JOHNSON
EDUCATION
Bachelor of Arts-University of Redlands, Redlands, California
PROFESSIONAL EXPERIENCE
Revenue&Cost Specialists/Management Services Institute-Partner
(January 1990-Present) Provide general financial management assistance to municipalities,counties,and special
districts.
Unit Distribution-Customer Service Representative
(July 1989-January 1990) Administered a distribution account for client and acted as a liaison between client and
their customers.
City of Redlands Redevelopment Agency-Redevelopment Intern
(November 1987-May 1989) Researched issues related to Redevelopment for the Director. Audited the Agency
budget. Researched and reported on the Agency's 20% "set-aside" responsibilities for Low& Moderate Income
Housing.
CLIENTS SERVED
MUNICIPAL BUSINESS SYSTEM COST STUDIES PROPERTY TAX TRANSFER
City of Banning City of American Canyon
City of Carlsbad Town of Truckee
City of Corona
Contra Costa County GANN APPROPRIATION LIMIT
City of Dublin,OH San Bernardino Mts.Community Hospital District
City of Folsom Town of Truckee
City of Highland
City of Huntington Beach COST ALLOCATION PLAN
Imperial County City of Carlsbad
City of La Puente Coachella Valley Association of Governments
City of Lincoln County of Cobb,GA
City of Lindsay City of Corona
City of Loma Linda City of Folsom
City of Long Beach Marine Bureau City of La Puente
City of Milpitas City of Lathrop
City of Monterey City of Lincoln
City of Morgan Hill City of Lynwood
City of Pico Rivera City of Palmdale
City of Redlands San Bernardino Associated Governments
City of Rialto County of San Bernardino Special Districts
City of Santa Clarita City of Santa Paula
City of Santa Paula City of Seaside
City of Seaside City of Solana Beach
City of Solana Beach City of Thousand Oaks
City of South Lake Tahoe City of Tracy
City of Thousand Oaks County of Tulare
City of Tracy
Town of Truckee SOFTWARE TRAINING/INSTALLATION
Ventura County Fire District City of Carlsbad
City of West Covina City of Dublin,OH
City of West Jordan,Utah Imperial County
City of Westminster City of Lake Havasu City,AZ
City of Yuba City City of Monrovia
-- City of San Rafael
City of South Lake Tahoe
Institute Of Public Affairs,Univ.Of So.Carolina
•
APPENDIX B
REFERENCE LIST
REFERENCE LIST
Jurisdiction Reference Title
City of Corona Elray Konkel Finance Director
909/736-2374 Debbie Foster Revenue Manager
City of Santa Paula Peter Cosentini City Manager
805/9334200 Glenda Jay Finance Director
City of Tracy Fred Diaz City Manager
209/8314103 Zane Johnston Finance Director
City of Solana Beach Robert Semple City Manager
619/755-2998 Gavin Cohen Finance Director
City of Rialto Joseph Guzzetta City Administrator
909/820-2525 Andrew Green Finance Director
City of Carlsbad Lisa Hildabrand Finance Director
760/434-2872
City of Folsom Dave Sanders Finance Director
916/355-7200 Doug Udell Asst. City Manager
City of Highland Sam Racadio City Manager
909/864-6861
City of El Cajon Mike Shelton Director of Finance
619/441-1721
City of Monrovia Mark Alvarado Finance Director
818/359-3231
City of Hemet Steve Temple Finance Director
909/658-9411 Rich Jacobs Sr. Accountant
City of Santa Clarita George Caravalho City Manager
661/255-4901 Steve Stark Admin. Services Director
City of Selma Judy Bier Finance Director
559/896-1064
r
D
MAXIMUS
GHelping Government Serve The People
Ms. Shawna Whallon April 12, 2001
Assistant Director of Finance
City of Azusa
213 East Foothill Blvd.
Azusa, California 91702
Re: Cost Plan and User Fee Study Proposal
Dear Ms. Whallon,
DMG-MAXIMUS is pleased to present the City of Azusa with a proposal for development of a
cost allocation plan and user fee study. DMG-MAXIMUS provided the City with a similar (and
successful) study seven years ago. Many of our clients update their cost of service studies after a
reasonable period of time, as service delivery and costs change, and the cities wish to: (1)
maintain revenue neutrality,and (2)comply with cost recovery legislation.
We are ready to begin work on this project upon approval of this proposal. Please feel free to
contact me at (916) 485-8102 if you wish to discuss any additional details. We look forward to
continuing our relationship with the City of Azusa.
Enclosed for your review is an example of a cost allocation plan and user fee study.
Sincerely,
RICHARD L. PEARL
Vice President
Attachments
4320 Auburn Boulevard, Suite 2000 • Sacramento, CA 95841 • 916.485.8102 • FAX 916.485.0111
Cost Allocation Plan and User Fee Study Proposal
Azusa,California
L'I'ABLE OF CONTENTS'
BACKGROUND 1
Summary 1
Cost Plan Rationale for Azusa 1
Fee Study Rationale for Azusa 1
DMG-MAXIMUS 2
PROJECT DESCRIPTION 5
PROJECT SCOPE AND DELIVERABLES 5
Proposed Scope 5
Exclusions and Limitations 5
Proposed Deliverables 5
PROJECT COST AND SCHEDULE 6
Proposed Cost 6
Proposed Cost for Each Fee Service Category 6
Reduced Study Cost Scale 6
Project Payment Schedule 6
Potential Project Schedule 6
METHODOLOGY AND APPROACH 7
CONCEPTUAL STUDY FRAMEWORK 7
Cost Allocation Plan 7
User Fee Analysis 8
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Cost Allocation Plan and User Fee Study Proposal
Azusa,California
''TABLE OF CONTENTS'
Public Policy Matrix 9
Public Policy Fee Matrix 10
OVERVIEW OF OUR APPROACH 11
WORK PLAN 12
Summary 12
Specific Tasks to be Performed 12
Workplan Flexibility 16
STAFFING PLAN 16
Summary 16
Project Roles 16
Project Staff 17
City Staff Requirements 19
CONCLUSION 20
Summary 21
References and Staff Qualifications 21
Proposal Approval 21
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Cost Allocation Plan and User Fee Study
Azusa,California
'BACKGROUND'
Summary
In 1994 DMG-MAXIMUS completed a cost allocation plan and user fee study for the City of
Azusa. That study identified significant revenue subsidies that, in a large measure, were
addressed by the City in fee revisions.
Like most cities and counties in the United States,the city of Azusa will continue to benefit from
an increase in revenue through improvements in the efficiency, appropriateness, effectiveness,
and understanding of some of the tools used to collect revenues. This proposal describes the
benefits the city will again receive from a fee for service study.
Per instructions of the City, we have sectioned this proposal into a cost allocation plan
component and a user fee analysis component. Our pricing includes both separate and combined
engagements. Please also note that our proposal includes only the administrative fees for the
utility operations,and specifically excludes all rate setting fees.
Cost Plan Rationale for Azusa
We understand that the City has not formally reviewed the overhead calculation since our 1994
study. By using our rigorous approach, professional staff, and proprietary software, the DMG-
MAXIMUS cost allocation plan study will detail the appropriate administrative support costs to
each city department, both within the general fund, and external to the general fund. We will
prepare a full cost plan for internal charging and a separate plan that fully complies with OMB
Circular A-87 for claiming federal and state grants and other external revenues. The benefits of
the cost plan include:
• Ability to charge federal and state grants (SB 90, CDBG, gas tax, Section 8 Housing) to
maximize recoveries through inclusion of indirect costs.
• External and objective support for internal charging,which can reduce criticism and mistrust
within the City.
• Enhanced cost recovery for central service departments and functions.
• Opportunities to increase revenue.
Fee Study Rationale for Azusa
We understand that the City has not formally reviewed its user fees since our 1994 study. We
find that the increased cost of providing services over time, without a corresponding increase in
fees, typically causes an under-recovery of costs. Furthermore, without an updated cost
allocation plan, charges to the city's enterprise funds may be understated, and that user fees most
likely do not include all of the applicable costs. Finally, the city may now be inadvertently
overcharging for services, which contravenes the traditional government concept of charging
only up to the full cost of the service provided. These three factors cause a fee schedule to
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become obsolete. Consequently, Azusa would likely benefit a great deal from a current review
and recalculation of the user fees, by recovering a greater percentage of costs, and more fully
understanding the true cost of providing certain services.
Just like the cost-recovery ability of a cost plan, our experience shows that user fee studies
normally result in the same situation—the legitimate increase in fees made possible by the
calculation of the true costs, which often exceeds the cost of the fee study, by as much as five
times annually. This benefit is above and beyond any additional tangible and intangible benefits
you would receive, including:
• Knowledge of the full cost of fee-related services
• Knowledge of the current subsidy or over-recovery of the cost of fee-related services.
• Comparison of fee levels with other jurisdictions.
• Identification of opportunities for additional revenue.
• Identification of potential new fees for services.
DMG-MAXIMUS' costs of service studies are uniformly implemented because of our attention
to the social, economic and political impacts of our analysis. Our numbers are totally
supportable, our recommendations are realistic and implementable, and we add value to the
study by contrasting the client's fee schedule with other comparable cities.
DMG-MAXIMUS
As the largest firm in the United States specializing in local government consulting, DMG-
MAXIMUS has long been pre-eminent in preparing cost allocation plans and cost of service studies.
We also provide a wide range of other fiscal and management consulting services. DMG-
MAXIMUS has 35 offices and more than three hundred consultants nationally.
DMG-MAXIMUS, originally known as David M. Griffith and Associates, Ltd., was founded in
1976. In May 1998 David M. Griffith and Associates, Ltd. merged with MAXIMUS, Inc. DMG-
MAXIMUS is recognized as the leading firm providing a broad range of management, financial,
operational, and human resource consulting services to local and state governments throughout the
country. Our clients include over 2,000 governments, universities, and other public sector and not-
for-profit
otfor-profit organizations.
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Azusa,California
Consultants of DMG-MAXIMUS have been called upon to examine virtually every facet of local
government operations. Major public sector services offered by DMG-MAXIMUS include:
• Cost allocation and indirect overhead rates
• Cost of Service analysis(activity-based costing,fee for service, user fee,etc.)
• Revenue enhancement(impact fee analysis,TOT audits,revenue maximization)
• Operations improvement and performance measurement
• Fleet management consulting
• Internal service fund analysis
• Executive recruitment
• Franchise fee/transient occupancy tax audits
• State Controller's Report preparation(California)
• State mandated cost recovery(California SB 90)
The DMG-MAXIMUS Western Region is headquartered in Sacramento, California,with additional
offices in Oakland, California, Irvine, California, Portland, Oregon and Denver, Colorado. There
are 35 professionals in the Western Region.
Our goal is to provide the best possible service in order to meet the City's needs while
maintaining the professional integrity of the product. We built our cost of service practice on the
foundation that we continue to be the most knowledgeable and technically advanced company that
provides these services. We not only have extensive experience in cost plan and user fee studies,
but also have been leaders in the development of software specific to these applications. We believe
that we set the standard in activity based cost analysis for local agencies.
DMG-MAXIMUS is a large firm. The size and breadth of our firm is advantageous to our clients
because of our capability to provide virtually seamless consulting service covering many
disciplines. The firm, however, has never forgotten its roots or the reasons for its continued
success, which is based on individualized service,provided quickly and professionally.
DMG-MAXIMUS is the leader in providing user fee cost analysis services to local governments
across the nation. With hundreds of fee study clients and many years of experience, we can
expertly and efficiently prepare a user fee analysis for Azusa. Specific highlights of our
experience include:
• Experience with Indirect Cost Allocation Plans and Cost Recovery. DMG-MAXIMUS
consultants prepare cost allocation plans annually for over 1,500 state, local, and special
district government agencies. Our California office has produced hundreds of cost plans.
This experience with so many different jurisdictions enables DMG-MAXIMUS consultants
to quickly and accurately analyze agency operations and determine the most beneficial
method(s) for recovering indirect costs. Furthermore, DMG-MAXIMUS consultants
perform all necessary data collection tasks and work to minimize staff disruption.
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• Experience with user fee studies. Our Western Region has performed over 75 user fee
studies since 1983. The studies were for clients whose population size ranged between 8,000
and 500,000.
• Implementation. The best study is of no value if it is not implemented. A hallmark of our
approach is that positive things happen: (1) city management and the community recognize
the impact of user fee services on the general fund, and (2) based on the former, your city
council can increase fees and reduce or eliminate user fee subsidies.
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'PROJECT DESCRIPTIONI
PROJECT SCOPE AND DELIVERABLES
Proposed Scope
The DMG-MAXIMUS study will include two cost allocation plans (full-cost and A-87), and an
analysis of the following fee for service areas: planning, engineering, building and safety, police,
fire, and recreation. For building and safety, DMG-MAXIMUS will provide its Nexus model
analysis. Building and safety fee schedules have traditionally been implemented based on
building valuation and the Uniform Building Code fee schedules. This format is now in question
due to the fact that there is no discernable relationship between the fee schedule and the services
provided. DMG-MAXIMUS has developed a new schedule based on the cost of providing
services to specific categories, i.e. single family residences (tract, custom), retrofits, commercial
(by category), industrial (by category), etc. We believe this is the most legally defensible format
for a political jurisdiction.
Exclusions and Limitations
It is important to also note the exclusions from our proposed services. DMG-MAXIMUS' study
will not include a review of any taxes, impact fees, or capacity based utility rates. Regarding
impact fees, we have performed many of these studies for cities in many states, and would be
pleased to offer a separate proposal for the city's consideration in this area, at the city's direction.
Proposed Deliverables
DMG-MAXIMUS will provide:
• A series of worksheets illustrating the appropriate allocations of the central service's
costs to other Azusa departments;
• A cost of service fee analysis, showing the full cost of providing services (allowable fee
levels),the current fee amounts,and the resultant current Azusa fee subsidies.
• A summary report documenting our findings and, at Azusa's request, a presentation to
the city council to explain our methodology and findings.
Both the cost plan and user fee studies are stand-alone documents. There is, however, an
economic benefit to the City to combine the studies, as this is a most cost/effective way for
DMG-MAXIMUS to produce the body of information, which translates into a lower cost to the
client.
PROJECT COST AND SCHEDULE
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Proposed Cost
The most efficient, cost-effective, and beneficial user fee study approach is to engage DMG-
MAXIMUS to complete a comprehensive cost allocation plan (full cost and OMB A-87) and user
fee study for the entire city (following departments: planning, engineering, building and safety,
police, fire, recreation). The full cost for the combined cost plan/fee study is $48,000 in
professional service fees plus a maximum of$3,500 in expenses. If the studies are contracted for
independently, the fee for the cost plan is $15,000 for the cost plan plus a maximum of$1,500 in
expenses, and $35,000 in professional service fees plus a maximum of$2,500 in expenses for the
user fee study. Please note that our cost of service studies traditionally return at least five times
the project's cost, in new revenue annually.
These fees incorporate all proposed consultant labor and expenses, including the cost for two
presentations to the city council. Additional consulting services and presentations are available
on a time and actual expense basis.
We propose the following payment schedule for completed project tasks:
Project Payment Schedule
Milestone % Of Total
Cost
Draft Cost Plan 25%
Draft Fee Analysis 40%
Final Cost Plan 25%
Final Fee Analysis 10%
TOTAL 100%
Potential Project Schedule
With good cooperation from a city, DMG-MAXIMUS can complete a cost plan/user fee study
project in four months from contract execution. _
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rVIETHODOLOGY AND APPROACH)
CONCEPTUAL STUDY FRAMEWORK
The DMG-MAXIMUS fee and charges analysis includes two distinct components: the cost
allocation plans, and the user fee (fee-for-service)analysis.
Cost Allocation Plan
A cost allocation analysis distributes central service and other administrative support costs to the
users of those services. Typical central service providers include finance, city manager,
purchasing, facility maintenance, personnel, city attorney, and other functions providing services
to other city agencies. The list is sometimes expanded to include departmental administration,
such as public works administration, community development administration, and other
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functions that have only a limited breadth of services.
The objective of this analysis is to provide information to help the city determine the full costs of
providing "line" services. The cost plan identifies the indirect/overhead allocations to be added
to a program's direct costs. The combination of direct costs and the indirect costs identified in
the Cost Allocation Plan comprise the total program costs. The DMG-MAXIMUS approach
allows management to see how much it costs to provide public and internal services. This
information is helpful in addressing internal charging issues, as well as enabling the evaluation
of privatization and contract services issues. A Cost Allocation Plan is essential for the
development and consideration of costs included in a Fee Study.
Other uses of the plan include:
• Charging indirect overhead to federal and state grants (e.g., SB 90, CDBG, Housing
(Section 8), and Gas Tax).
• Charging external agencies and funds their fair share of support costs (e.g.,
redevelopment agencies and enterprise funds).
The cost allocation methodology followed by DMG-MAXIMUS (double step down, cross
allocation) is derived from the federal government's guidelines for cost allocation: OMB A-87.
Specifically, the format is the most rigorous of the four allowable formats, and we believe it
provides the best, most defensible results. The methodology is approved by the California State
Controller's Office for inter-governmental cost claiming. The DMG-MAXIMUS system
produces specific allocations from the central service departments to user operations, but we can
also use the system to create percentage overhead rates for users. This information can help the
city develop burden rates and full-cost productive hourly rates.
In the cost plan, we subdivide each central service into discrete missions, or functions, and then
distribute indirect costs to each user of service based on proportionate usage. While the detailed
cost plan document tends to be voluminous, we also prepare summary schedules (located at the
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front of the report) to enable easier reading and understanding of the outcomes. The remaining
sections provide the distribution methodology and work papers. There are no hidden allocations
or accounting tricks, so both the providers of services and the receivers of those services can
analyze the data and ultimately feel comfortable that they were treated fairly in the distribution.
User Fee Analysis
A DMG-MAXIMUS User Fee Study determines the full cost of services offered by the city for
which user fees are currently being charged or could be charged. We compare the full cost of the
services to the agency's fee schedule to determine the amount of subsidy (or occasionally,
overcharge). DMG-MAXIMUS can also assist in understanding economic issues related to fees,
such as elasticity of demand, and we can provide information on what other jurisdictions charge
for similar services. With the additional knowledge from our study, the City can make informed
decisions concerning appropriate fee adjustments to increase revenues or ensure that charges are
consistent with costs.
The underlying rationale to charge full cost for user fees is simply this: the city is providing a
distinct service or product to a business or individual that is gaining a monetary, emotional, or
recreational benefit. Equity principles suggest that others who do not receive the benefit should
not subsidize those individuals or businesses that do receive the benefit. For example, why
should a long-term resident living downtown contribute towards a subsidy to a developer
opening up a new subdivision on the edge of town?
Historically, cities generally did not stress subsidy issues, since there were alternative tax
avenues or sufficient resources available to fund government services. With increasing service
demands and reductions in state and federal contributions, revenue-related issues have come to
the forefront—and subsidies impact revenues. We recognize, however, that there are
circumstances and programs that may warrant a subsidy, such as youth, senior, and
disadvantaged recreation programs, certain classifications of code enforcement, library services,
etc. The issue of fees and subsidies is, basically, a public policy consideration. The city
ultimately needs to decide which fees and services to subsidize, and DMG-MAXIMUS can
provide the information necessary to make an informed decision.
To clarify the concept, DMG-MAXIMUS developed a service/benefiting agent matrix to help
place the subsidy issue in proper context. The matrix shown on the following page presents the
conceptual basis for typical fees and potential subsidies:
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Azusa,California
PUBLIC POLICY MATRIX
WHO BENEFITS TYPE OF SVC. TAX V. FEES
- I y
v W V
Community Public 100% Taxes
v y v
Primarily the
comm. w/ someMostly taxes &
Public/Private some fees
indiv . benefit
v
Primarily the Mostly fees &
indiv. w/ some Private/Public some taxes
comm. benefit
v
Individual
Benefit Private 100% Fees
The matrix on the following page addresses typical fee issues in detail for selected hypothetical
fees:
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PUBLIC POLICY FEE MATRIX
Priv/Individual Mostly Private/ Mostly Public/ Public
FEE: Oriented: Some Public: Some Private: Oriented:
CURR. FULL RECM % RECM % RECM % RECM %
DEPARTMENT/FEE FEE COST FEE Subs. FEE Subs. FEE Subs. FEE Subs.
PLANNING
Conditional Use Permit 1,500 2,500 2,500 0%
Lot Line Adjustment 850 1,250 1,250 0%
Tentative Map 2,500 4,000 4,000 0%
Design Review 500 1,000 800 20%
Environ. Impact Review 3,000 6,000 6,000 0%
Appeal 25 800 100 90%
General Plan Update 0 125,000 0 100%
CODE ENFORCEMENT
Apartments(>4) 0 1,500 1,500 0%
Private Residences 0 300 200 33%
Restaurants 750 1,000 1,000 0%
ENGINEERING
Street Cut 35 90 90 0%
Tentative Map 850 1,225 1,225 0%
Public Right of Way 0 600 300 50%
Plan Check 1,000 1,400 1,400 0%
RECREATION
Adult Sports
Tennis 2 5 4 20%
Dance Classes 30 40 35 13%
Trips 30 60 40 33%
Youth/Seniors
Tennis 2 5 3 40%
' Trips 20 40 25 37%
Golf 10 30 25 17%
The city can develop this matrix using information from the DMG-MAXIMUS Fee Study to help
decide appropriate fee levels and subsidies. DMG-MAXIMUS believes that construction of the
matrix is important in generating acceptance of fee for service cost recovery levels by the city
council and community/business groups. Through this visual perspective, the rationale for cost
recovery becomes clear and defensible.
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OVERVIEW OF OUR APPROACH
There are five aspects of our approach that we believe are most significant:
1. Interactive Work Program - The DMG-MAXIMUS approach is to work closely with
management and staff to produce an analysis of cost of services and revenues that is
thoroughly understood and verified by city staff. To this end, we repeatedly review our
analyses and findings with staff, elicit their input, and draw upon their intimate
knowledge of city operations. This is not to say that there may not be a divergence of
opinion at the recommendation stage. Our goal, however, is to provide the client with the
best information and statistics possible. Final implementation decisions, of course,
remain with city leaders.
2. Experienced Team - DMG-MAXIMUS has been in existence nationally since 1975 and
in California since 1979. Our Western Region management team has decades of
experience. Most DMG-MAXIMUS consultants have been with the firm more than five
years and all on-site consultants have significant experience in achieving the goals Azusa
wishes to accomplish with this project.
3. Proven Methodology - DMG-MAXIMUS has produced thousands of cost plans for all
sizes of cities and counties. We are the recognized experts in this field, both locally and
nationally. We have also produced over 75 user fee studies in California, and at least an
equal number in other states. Our systems have been time-tested. Of critical importance,
however, is that our consultants are proven in their particular fields of experience. We
get the job done--to our clients' complete satisfaction.
4. Computerized Support - DMG-MAXIMUS will utilize two integrated computer
systems in the study. DMG-MAXIMUS developed its first automated cost allocation
plan system in the late 1970's, and has consistently updated that model. Our system is in
use in hundreds of governmental organizations. DMG-MAXIMUS' user fee model -
FASTR - is also unique in that it specifically targets the cost of providing services, and
measures the results from alternative fee strategies.
5. Realistic Pricing - DMG-MAXIMUS' strategy has always been to provide exceptional
service at a fair price. We are in the California marketplace for the long term. A client
well served will return for future engagements.
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WORK PLAN
Summary
DMG-MAXIMUS will initially construct the cost allocation plans, as the full cost plan is to identify
the full costs to include in the cost of service/fee study. We will then separate all costs and revenues
within the various fee-related departments, and other appropriate functions into tax-based and fee-
based groupings. Within the latter, we will then identify and calculate the full cost of all existing
fees within the departments under study. Additionally, we will calculate the full cost of potential
fees for these departments based on experience gained from previous engagements.
At the conclusion of the above analysis we will prepare a report of our findings and present fee
recovery recommendations. The report will include current fees, recovery levels as a percentage of
full costs, full costs,recommended fees,and remaining subsidy. We can provide a fee schedule and
plan,as well as assist the city with an implementation strategy.
The following section describes the specific tasks that DMG-MAXIMUS will perform in order to
accomplish the goals of this study.
Specific Tasks to Be Performed
Task 1:Project Initiation
In our first task we will carry out those activities required to begin the engagement in a
manner that will ensure timely and successful project completion. The specific activities
include the following:
• Meet with the Finance Director and other appropriate city representatives to discuss the
goals,objectives,and overall scope of the engagement. Our designated Project Manager
will represent DMG-MAXIMUS in this initial meeting. It is important that individuals
who will be most directly concerned with the ultimate engagement results represent the
city.
• Based upon this meeting, we will finalize the scope of the engagement. Any significant
variations will be documented in writing and provided to the city.
• Establish project liaison requirements.
Task 2: Develop Cost Allocation Plans
DMG-MAXIMUS will prepare two cost allocation plans:
1. A Full Cost central service cost allocation plan for use in determining overhead
charges to all city programs for primary use in calculating full costs in the User Fee
Study,and
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2. An OMB A-87 plan for use in intergovernmental grants.
The DMG-MAXIMUS cost allocation plan methodology is a double step down, cross
allocation methodology, which is the most rigorous and comprehensive of the distribution
options contained in Federal Circular OMB A-87 (the "bible" of cost allocation distribution
systems). Our OMB A-87 plans adhere to the 1996 revised guidelines.
Task 3:Develop Schedule of Service Areas to Be Analyzed
DMG-MAXIMUS will develop a schedule of current and potential fee-for-service
activities. Our experience in working with many other cities will aid in the development
of potential fee services.
Task 4: Develop Direct Service Costs
For each fee-for-service activity (or a non-revenue producing service for which a fee could
be imposed), DMG-MAXIMUS will develop the direct costs of providing the service.
Direct costs generally include the salaries and benefits of those individuals actually
performing the service and any services and supplies that can be directly attributable to the
service. To the extent possible, we identify as many costs as possible as direct and treat the
appropriate remaining costs as indirect. Based upon our extensive experience,we know that
most supervisory and service and supply costs will be treated as indirect costs. In any case,
a hallmark of the DMG-MAXIMUS approach is a fully substantiated cost analysis.
For building-related fees, we will identify service costs on an occupancy basis (residential
dwelling,restaurant,retail store,commercial high rise,etc.)and calculate the direct cost on a
square footage basis. This methodology would replace the UBC rate tables as a charging
mechanism. We believe this methodology produces a stronger nexus between permit/plan
check fees and costs.
Task 5: Distribute Department/Program Overhead Costs
DMG-MAXIMUS will distribute indirect costs to each service or activity. In general,
these costs reflect supervision occurring at the department/division/program level and
associated services and supplies. Our approach to this distribution depends on the
complexity of the governmental unit being analyzed. The overall distribution of costs is
accomplished using our FASTR System. This system is the most comprehensive tool
available to analyze governmental service costs.
Task 6:Match Service Revenue with Service Costs
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We will match the total cost of each service with the fee revenue received from each service.
In its basic form, the resulting table illustrates the total tax subsidy or the revenue surplus
generated by each service. This table provides a departure point for use in fee discussions.
Task 7: Review Cost, Revenue, And Subsidies With Departments
The cost, revenue, and subsidy analyses developed by DMG-MAXIMUS are based on
information supplied by city departments. In Task 7, we return to each department to
review the preliminary results. We believe this to be an extremely important step,as it is the
departments that must ultimately be comfortable with our cost analysis and methods. Based
upon the departmental reviews,we make appropriate changes.
Task 8: Conduct Comparative Survey
To complement the cost analysis, DMG-MAXIMUS will compare select fees to those of up
to five similar jurisdictions. This comparative survey will establish an indicator of the range
for fees being charged by other comparable cities. Cities often want to know how current
and proposed fees compare to neighbors when making pricing decisions.
Task 9: Review Cost And Revenue Relationship With City Management
Once we reach consensus with departments that the analysis portrays reality,we will review
results with management. Cities usually find it desirable to eliminate subsidies,but there are
issues to consider before making fee adjustments:
• It may not be politically feasible to raise a particular fee.
• It may not be legal to raise a particular fee.
• An undesirable social consequence may result from raising a particular fee(e.g., a group
may be excluded from a desired service).
• An undesirable economic consequence may result(e.g., a fee increase may result in less
revenue due to decreasing demand).
Based upon these discussions and DMG-MAXIMUS' experience, we will formulate
appropriate recommendations.
Task 10: Revise Analysis/Recommendations
Based on our discussions with senior management, we will make appropriate revisions to
the study and/or our recommendations. --
Task 11: Develop Implementation Strategy
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Azusa,California
A principal objective of the DMG-MAXIMUS approach to all of our engagements is to
facilitate positive change. We will work with senior staff to develop an appropriate and
effective implementation strategy that will reflect Azusa's needs. We will also work with
the city to address on-going maintenance of the study results.
Task 12: Prepare and Provide Draft Report
DMG-MAXIMUS will provide our project report to department heads in draft form. This
step offers an opportunity to discuss individual recommendations in detail. Based upon
these discussions,we will modify the draft report as required and submit it in final form.
Task 13: Present Final Report
The product from the proposed engagement is often controversial. We believe it is
extremely important that all parties fully understand the basis for and rationale behind the
project fmdings and recommendations. To this end, DMG-MAXIMUS is committed to
providing all interested parties with an understanding of our approach and results. This
typically requires:
• A presentation to management with less emphasis on detailed methodology, and greater
emphasis on the impact of recommendations and implementation strategies.
• Engagement presentation to the city council to provide an overview of the project and its
findings and to answer any questions concerning the project.
Task 14: Project Close Out
At the end of the project, we will perform those activities necessary to ensure successful
•
project completion, including:
• Answer remaining questions and explain outstanding issues,and
• Discuss update requirements and strategies.
Work plan Flexibility
Tasks 1-14 discussed above summarize the activities necessary to accomplish most cost plan and
fee study projects. However, we remain flexible throughout the engagement, which allows us to
modify this approach to meet the unique circumstances experienced by each client.
Consequently, if this work plan does not specifically meet your needs, we- will work with you to
revise our approach to fully accomplish the goals of this project.
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STAFFING PLAN
Summary
The preparation of central service cost allocation plans and comprehensive user fee studies are our
primary DMG-MAXIMUS service to local government. Consequently, DMG-MAXIMUS is able
to assign a team of knowledgeable,experienced consultants to the engagement.
Specific areas of expertise of our proposed project team include:
• Governmental cost accounting
• Knowledge of governmental service delivery within each of the departments analyzed
• User fee service structure and service type in other local governments
• Development of presentations for councils,boards,and the general public
Project Roles
Our Staffing Approach will include the following team members:
• Project Director- The project director's role is to provide project oversight. This includes
developing project schedules, assuring that adequate staffing resources are provided when
needed, and reviewing project work products. The DMG-MAXIMUS project director is
available at all times to assist in the resolution of any problems.
• Project Manager-The project manager is responsible for the day-to-day supervision of the
engagement. The project manager will participate directly in departmental interviews, fee
identification, cost development, and report preparation. The project manager will be
responsible for apprising the City of progress on an on-going basis.
• Support Consultants — A cost allocation plan/user fee study requires significant data
acquisition and manipulation. DMG-MAXIMUS will assign support staff to assist the
Project Manager in this effort.
We will staff the Azusa project with consultants from our Western Region's Irvine office, with
additional support available from our Sacramento office. We will not utilize the services of any
other firms. DMG-MAXIMUS will provide a team of highly skilled consultants for Azusa's study.
Project Staff
The following section describes the project team and their respective roles. The professional
summaries illustrate the extensive experience of the consultants that will allow us to bring this
project to a successful conclusion. Specific staffing below the project manager level will depend
upon the start date of the Azusa engagement.
Project Director: Richard Pearl, Vice President
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As a principle officer in the firm, Mr. Pearl will be involved with contract negotiations, provide
general project oversight, and marshal appropriate company resources to complete the project in
an expeditious and quality fashion. Mr. Pearl has managed and directed hundreds of cost
analysis projects during his career with DMG-MAXIMUS. He has been with the firm since 1976.
Project Manager and Lead Consultant: Ms. Greta Davis Manager
Greta Davis will serve as the Project Manager. Ms. Davis brings a rich combination of
significant project management and technical experience to the project. She has managed many
cost allocation and cost of service/fee studies for government clients, including (recently) the
cities of Vallejo, Dana Point, Mission Viejo, and Lynwood. She is a detail-oriented and hands-
on project manager who excels in communicating with clients. Her responsibilities will include
development of the overall project plan, communication and coordination with City
representatives, and organization and direction of the Project Team. An important goal of the
Project Manager is to maintain the Project Team as a cohesive group and provide a consistent
approach and voice to the City. Frequent communication between the consultant and the City
will be critical to the successful completion of this project, and the Project Manager will fulfill
this responsibility as well.
Technical Consultant Pool: Various Consulting Staff
The Project Manager and Support Consultant will provide most of the work necessary to
complete this project. In an effort to maximize project efficiency and minimize cost, the Project
Manager may also utilize a pool of highly skilled and experienced Technical Consultants. Our
intention is to match specific skills and abilities to the appropriate tasks and project elements.
The pool includes,but is not limited to,the following consultants:
Thomas J. Moore is a Manager in the financial services division of DMG-MAXIMUS. Since
joining us in 1997 he has worked on a wide variety of cost of services studies at the local and
state government level. Mr. Moore has participated in many rate calculation studies. The most
recent study was with the State of Nevada to analyze the rate calculation methodology for the
Department of Information Technology. Mr. Moore conducted a detailed analysis of a Street
Maintenance Division within a city's public works department. The Street Maintenance
Division study made recommendations related to items and services that should be directly or
indirectly charged to service recipients. Mr. Moore worked closely with one of our city clients to
analyze their printing services. The key to the study was the development of the cost per copy
rate. The analysis factored in labor, materials, and equipment costs on a per copy basis then
compared this cost to that of local vendors. Prior to joining DMG-MAXIMUS he worked with
public entities developing software. Mr. Moore holds a Bachelors of Science in Business
Administration with a concentration in Finance and a Masters of Business Administration, both
from California State University, Sacramento.
Joseph P. Sumac is a Manager in our Sacramento office, specializing in financial accounting,
cost allocation, and revenue projections for cities, counties, and special districts. Recent projects
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Azusa,California
include the development of a database used in creating GASB 34 compliant financial reports, a
revenue forecasting study for the San Francisco Planning Department, and a projection of
maintenance costs in the City of Paso Robles, CA. During his tenure with DMG-MAXIMUS he
has prepared cost allocation analyses for the California cities of Vacaville, South San Francisco,
Santa Maria, and Paso Robles, and for the Colorado counties of Routt, Moffat, Gunnison, and
Saguache. Prior to joining DMG-MAXIMUS Mr. Stimac worked in the banking industry and
also designed a database used in an environmental study of the Great Basin for the University of
California at Davis. He received a BA and BS from Aquinas College with majors in accounting,
business administration, and philosophy. In 1997 he completed a Master of Arts degree in
analytical philosophy from the Claremont Graduate School.
Luis M. Garcia is a Senior Consultant in our financial services division in the Denver, Colorado
office. He has worked in cost allocation, user fee practice and has assisted on several special
projects. Mr. Garcia has worked on special projects including a ten-year budget forecast for
Rincon Valley Fire Protection District, an efficiency and productivity study for the Pasadena
Police Department Records Division, and a performance measurement study for the City of
Santa Clara. Mr. Garcia has assisted in the preparation of cost allocation plans for several
California cities and special districts. These projects include cost plans for Temecula,
Richmond, Citrus Heights, Mountain View, Morro Bay, and Santa Rosa Communications
Center; fee studies for the cities of Temecula and Richmond. Prior to joining DMG-MAXIMUS
he was a Senior Analyst in the Budget Division of Pima County, AZ. Mr. Garcia received his
Bachelor's degree in Political Science from the University of California, Riverside.
Melissa Gerrits is a Manager with DMG-MAXIMUS and has worked for DMG-MAXIMUS for
five years. She is responsible for the following projects: cost allocation plans, state controller
annual city transaction reports, indirect cost rate proposals and trial court funding claims. Ms.
Gerrits has prepared cost allocation plans for Alpine County, Inyo County, Modoc County,
Mono County, Nevada County, San Benito County, Sierra County, Tuolumne County, Yuba
County,the City of San Fernando, and the City of Woodland.
Iris Ho is a Manager in the financial services division in the Sacramento office. Over the last
four years she participated in cost allocation plans, user fee studies, jail rate studies, state
controller's report preparation, and indirect cost rate proposals for various cities and counties.
Representative clients include Alameda, Beverly Hills, Burbank, Calexico, Culver City, El
Centro, Hawthorne, Hayward, Lathrop, Sacramento, Roseville, Salem, San Clemente, San
Fernando, Stockton, and Ventura. Her prior experiences included financial statement
compilation and audit, financial analysis, job costing system implementation, and various tax
preparations in both areas of public accounting practice and private sectors. Ms. Ho received
both a Master's degree in Accounting and a Bachelor's degree in Computer Science from the
University of Mississippi. She also passed the CPA examination in 1995.
Patrick Nga is a Senior Consultant in the Irvine office. Prior to his recent joining our firm, he
held public sector finance positions in the mid west, and was a consultant for a software firm
installing financial models.
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City Staff Requirements
With the highly experienced team DMG-MAXIMUS will bring to this project, city staff
requirements are held to a minimum. Obviously, however, there is information only city staff can
provide, so we will need some assistance and data gathering. Another necessary commitment is the
review and critique of data, assumptions, and recommendations. While we cannot project a certain
number of hour's commitment, we can assure the city it will not be burdensome.
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CONCLUSION)
Summary
DMG-MAXIMUS is excited about the possibility of assisting Azusa by completing Cost
Allocation and Cost of Service studies. Our company motto is Helping Government Serve the
People. Based on our experience with other cities and counties throughout the West, we believe
that Azusa and its citizens would reap many benefits from these studies. Very often, the
additional revenues identified in our studies exceed the cost of the studies in the first year. The
additional revenue can help Azusa provide greater services by reducing the reliance upon limited
general fund resources to fund other programs. The detailed cost information resulting from the
Cost of Services Study can help management make more informed and beneficial decisions
regarding specific programs and services. Furthermore, refined fees based on the actual cost of
providing the services can help citizens better understand and appreciate the fees they pay to
their government.
DMG-MAXIMUS is prepared to provide these services through our professional and highly
skilled consultants, who will use our thoroughly tested and successful project approaches and
methodologies. We look forward to the opportunity to provide these quality services to Azusa.
References and Staff Qualifications
Our firm currently has more cities and counties under contract in the United States to provide cost
plan and fee study services than all other firms combined. We believe we have achieved this
position of leadership through:
• Comprehensive responsibility for establishing an indirect cost recovery system.
• Guaranteed approval of our cost plans by federal and state representatives.
• Thorough knowledge of regulations pertaining to cost recovery and working
relationships developed in government at all levels.
• Quality development of fee study methodologies and approaches through
consultation with governments, industry groups,and advocates.
You are welcome to contact any of our clients in California, or elsewhere concerning our services.
Specific references are:
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Cost Allocation Plan and User Fee Study
Azusa,California
City of Orange:
Ms. Helen Bell
Director of Finance
(714) 744--2234
City of Irvine
Mr. Kurt Mowery
Office of the City Manager
(949) 724-6053
City of Moreno Valley
Mr. Steve Chapman
Director of Finance
(909)413-3075
Proposal Approval
DMG-MAXIMUS is prepared to provide the services described in this proposal.
Approved for DMG-MAXIMUS: Date: 4/ ///6/
Richard Pearl, Vice President
DMG-MAXIMUS
4320 Auburn Boulevard, Suite 2000
Sacramento, CA 95841
(916)485-8102
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