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Thursday, February 21 , 2019, 7:18 pm | Partly Cloudy 49º


Ron Fink: Lompoc’s ‘Reimbursement Fee Study’ Needs Work

The city of Lompoc recently held a public hearing to discuss a staff proposal to move a large sum of money, collected through levying utility user fees, to the General Fund in order to, as the staff representative put it, “bolster the GF.”

The way it would work according to the proposal was that a percentage of the so-called enterprise fund budgets for five activities would be transferred to account for “services received” by the EF from the GF.

The services would primarily include police/fire protection and street repair plus staff functions such as accounting, procurement and human resources.

However, the calculations weren’t based on actual services that the funds have received. Instead they’re just to pay for services that might be received at some future date.

The Enterprise Funds are separate, self-sustained utility services that provide citizens with services that keep the lights on, provide fresh drinking water, dispose of waste water and solid waste.

Unlike taxes that require a majority vote of the people, fees are assessed to the users of these services by a majority vote of the City Council to pay for the operation and maintenance of the facilities and equipment used to provide these services.

Conversely, the GF pays the utilities for the services they provide to GF facilities. To many, including some council members, this appears to be and endless loop of money moving back and forth from cubicle to cubical down at city hall.

The city’s utility commission met prior to the council meeting, and as Carol Benham reported in Noozhawk, it declined to take any action pending the outcome of the council meeting.

Benham wrote “Commissioners said the underlying methodologies used to justify the charges were ‘deeply flawed’ and didn’t reflect the actual costs of services the utility departments would be required to pay.”

They were right.

Having similar concerns, the Santa Barbara County Taxpayers Association challenged the methodology used to calculate the amount to be transferred.

The SBCTA also asked if the transfers met the test of being “reasonable” and “defensible” as required by the state constitution.

The consultant who prepared the Reimbursement Fee Study argued that his methodology was “legally defensible” — I guess the presence of multiple graphs and tortured calculations in a thick study met the test of legality.

But, it didn’t meet the test of a logical or nationally accepted methods of determining how to assess the cost of services received from other city departments.

The City of Fullerton, Calif., seems to have captured the essence of “reasonable” and “defensible,” and they have adopted a methodology in a similar study for their city that captures direct/indirect costs, fixed asset expenses (maintenance), general overhead (accounting, city clerk, human resources etc.), department overhead (management) and debt service costs in order to establish how much to transfer from the water utility to the GF.

The Fullerton consultant says in his background statement “In particular, there are concerns regarding whether the City’s approach complies with Proposition 218, enacted by the voters of California in 1996. This proposition states that fees and charges shall not exceed the cost of providing the service for which the fee or charges is imposed. In other words, there needs to be a nexus between the fees/charges imposed and the cost of providing the service.”

Seven other speakers concurred and urged the council to try a different approach to the issue. Benham quotes Councilmember Jim Mosby in a separate report:

“One of the difficulties I’m having with this is it because it’s about what the general fund needs and not the service being provided,” he said. “The budget becomes the driver on a lot of these charges, not the direct cost of the service being provided to the enterprise.”

When the vote was taken, all five council members agreed to appoint an ad hoc committee consisting of two council members, a Certified Public Accountant, a SBCTA representative and staff support. The ad hoc committee is to return in 60 days with their report.

It’s nearly two weeks later now, and with less than seven weeks left until a report is due the committee hasn’t even had its first meeting. 

The staff is suggesting that the first meeting be just to decide when to hold the next meeting, which appears to be a strategy designed to delay any serious input from five people who are already intimately familiar with the issue.

How the schedule, established by council direction, will be kept using this strategy is anyone’s guess.

We will have to wait and see if the city staff and full council agree that there is a better way to establish how much should be transferred than by simply using percentages and not accounting for actual costs as required by both state law and successful litigation.

— Ron Fink, a Lompoc resident since 1975, is retired from the aerospace industry and has been active with Lompoc municipal government commissions and committee since 1992, including 12 years on the Lompoc Planning Commission. He is also a voting member of the Santa Barbara County Taxpayers Association. Contact him at [email protected]. Click here to read previous columns. The opinions expressed are his own.

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