Report 2020-804 Recommendation 5 Responses

Report 2020-804: City of Lindsay: It Must Take Substantial Action to Address Its Financial Problems and Its Inadequate Management Practices (Release Date: August 2021)

Recommendation #5 To: Lindsay, City of

To ensure that the rates and fees it charges are appropriate to cover the cost of the related services, by August 2022 Lindsay should determine its cost to provide each of the services for which it charges a fee or rate and, as necessary, improve its accounting records to identify these costs. For any fees or rates that do not cover the costs of their related services, consider increasing those fees or rates, including a phased approach for large increases. For any fees or rates that are above the cost to provide the related service, consider reducing those fees or rates.

Annual Follow-Up Agency Response From December 2022

On March 21, 2022, City Staff and Willdan Financial Services began evaluating the City's current fee structure and charges and conducted a comprehensive analysis and study of the City's activities and services, the costs of providing those services and activities, the beneficiaries of those services, and the revenues produced by those paying fees and charges for such services and activities. The results and findings of said analysis and cost allocation study are detailed in the attached final reports issued by Willdan. The proposed fee schedule within the User Fee Study Report represent the reasonable costs incurred by the City in providing the listed services and activities. The report does not include any fee recommendations that exceed the City's cost of providing those related services and activities.

Staff brought forward Resolution 22-65 for adoption by the Lindsay City Council on December 13, 2022, to ensure the revenues produced by user fees are sufficient to defray the cost of providing such services and do not exceed the estimated reasonable cost of providing such services. It is important to emphasize that any user fees that are set to less than 100% cost recovery are subsidies that must be covered by another revenue source, and in most instances by the General Fund. The City Council approved the new city-wide fee schedule on December 13, 2022.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

1-Year Agency Response

Response: The City partially agrees with this recommendation.

Corrective Action: The City requested a partial extension and proposed the

following timeline.

By August 2022:

- Complete a water rate study and make a recommendation to the Lindsay

City Council

- Complete a sewer rate study and make a recommendation to the Lindsay

City Council.

- Complete an internal review of miscellaneous departmental fees as staff

resources allow.

- Issue a Request for Proposals (RFP) that would provide for a study of all

outstanding fees yet to be reviewed.

By February 2023:

- Present individual recommendations to the Lindsay City Council to either

increase, decrease, or maintain fees based on the RFP results.

By August 23, 2022, the City requested a partial extension and did not receive

confirmation from the State Auditor on whether the extension was granted or not.

The City has procured a financial analysis of water and sewer rates through

Provost & Pritchard whose findings are attached to this report as Exhibit B &

Exhibit C. City staff has worked diligently to evaluate and review miscellaneous

departmental fees and issued a Request for Proposals (RFP) that would provide a

study of all citywide fees.

On February 22, 2022, the contract for a Full Cost Allocation Plan, Comprehensive

Citywide User Fee Study, and Impact Fee Analysis was awarded to Willdan

Financial Services.

On August 23, 2022, City staff presented the fee tables based on Willdan Financial

Services' study and analysis (Exhibit D). City staff plans to hold a public hearing

to consider the adoption of a new citywide fee schedule, establishing and amending

municipal fees and charges for various municipal services, and repealing all other

resolutions relative to municipal fees and charges thereto.

Estimated Completion: August 2022.

Responsible Staff: City Management, Finance Department, City Services,

Recreation Department, Public Safety Department.

Status: Complete.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

We recognize that the city of Lindsay has taken steps toward implementing our recommendation. However, as the city stated in its response, it plans to propose to the city council updated fees and charges for adoption in early 2023. Until it does so, we will continue to report this recommendation as not fully implemented.

6-Month Agency Response

The City requests a partial extension and proposes the following timeline.

By August 2022:

- Complete a water rate study and make a recommendation to the Lindsay City Council

- Complete a sewer rate study and make a recommendation to the Lindsay City Council.

- Complete an internal review of miscellaneous departmental fees as staff resources allow.

- Issue a Request for Proposals (RFP) that would provide for a study of all outstanding fees yet to be reviewed.

- Establish new accounting lines so as to better identify how much revenue is received from each fee or rate.

By February 2023:

- Present individual recommendations to the Lindsay City Council to either increase, decrease, or maintain fees based on the RFP results.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The city plans to conduct the following actions by August 2022:

Complete a water rate study and make a recommendation to the Lindsay City Council

Complete a sewer rate study and make a recommendation to the Lindsay City Council.

Complete an internal review of miscellaneous departmental fees as staff resources allow.

Issue a Request for Proposals (RFP) that would provide for a study of all outstanding fees yet to be reviewed.

Establish new accounting lines so as to better identify how much revenue is received from each fee or rate.

The city also plans to present individual recommendations to the Lindsay City Council to either increase, decrease, or maintain fees based on the RFP results by February 2023.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2020-804

Agency responses received are posted verbatim.