To maintain fiscal health, protect general taxpayer funds, and comply with California state law, the City of Pacifica periodically conducts comprehensive studies to evaluate and update its municipal fee structures. These studies, performed by an independent financial consultant, Willdan Financial Services, ensure that all City charges are accurate, transparent, and legally defensible.

The City's last Cost Allocation Plan and Comprehensive User Fee Study was completed in 2013, using FY 2011 budget data. California municipal best practices recommend updating these studies every 5 to 8 years. Because significant time has elapsed since the last update, the City's current fee structures are likely resulting in the under-recovery of service delivery costs across multiple departments.

To address this comprehensively and efficiently, the City Council authorized a single, unified scope of work with Willdan Financial Services covering three distinct financial analytical projects: a Cost Allocation Plan (CAP), a Comprehensive User Fee Study, and a Development Impact Fee (DIF) Nexus Study.

While the project procurement and consulting scope are fully unified, the studies themselves are distinct deliverables governed by different legal frameworks. Consequently, the User Fee Study and the Development Impact Fee Nexus Study will proceed as completely separate reports, coming forward to the City Council at different times through independent public review and engagement processes. The City aims to complete the full process for all studies in time for implementation before the end of FY 2026–27.

Cost Allocation Plan (CAP)

The Cost Allocation Plan calculates the full, true cost of City staff time and central operations. It serves as the foundation that the User Fee Study and DIF Nexus Study build upon, as both rely on accurate cost figures to set fee levels.

• Identifying Central Service Overhead: The study evaluates central service departments (such as IT, Human Resources, Finance, City Manager, and City Clerk) and establishes rational, equitable, and auditable allocation bases (e.g., direct labor hours, employee headcount, square footage, or transaction volume) to allocate overhead costs to direct service departments.
• Calculating Fully Burdened Hourly Rates: Using the overhead allocations, the study calculates a fully burdened hourly rate (FBHR) for every City staffing position. This rate reflects direct wages, employee benefits, departmental operational overhead, and an equitable share of central citywide overhead.
• Basis for Cost Recovery: These fully burdened hourly rates represent the actual, total cost to the City of delivering staff labor and serve as the baseline input for every fee calculation in the User Fee and Development Impact Fee studies.
• Federal & Grant Compliance (2 CFR Part 200): For central services and departmental costs that the City recovers through federal or state grants, interagency billings, or indirect cost reimbursements, the study structures allocations in full compliance with 2 CFR Part 200 (Uniform Guidance), ensuring all indirect cost charges are auditable and compliant with federal standards.

User Fees and the Comprehensive User Fee Study

About User Fees

User fees are charged directly to specific individuals, property owners, or businesses requesting discretionary municipal services. Examples include building permit processing, planning and zoning reviews, public works engineering inspections, police and fire special service requests, and recreation facility rentals.

• Proposition 26 (2010) Cost Recovery Standard: Under California Proposition 26 (2010), a voter-approved amendment to the state constitution, a user fee cannot exceed the estimated reasonable cost of providing the specific service. User fees are strictly designed to cover direct labor, materials, and associated administrative overhead, and cannot generate excess revenue for general city spending.
• Protecting General Fund Resources: Charging direct beneficiaries for individual service requests ensures that general tax dollars (such as property tax and sales tax) remain dedicated to broad public benefits that serve the entire community, such as police patrols, street maintenance, parks, and emergency response.

About the Comprehensive User Fee Study

The Comprehensive User Fee Study will evaluate discretionary fee-funded services across all City departments (including Administration, Finance, Planning, Building, Public Works, Police, Fire, and Parks, Beaches & Recreation) to determine whether current fee levels match the actual cost of service delivery.

• Calculating Fully Burdened Service Costs: By combining staff time requirements, operational expenses, and the fully burdened hourly rates established in the Cost Allocation Plan, the study will quantify the precise total cost of providing each individual service.
• Evaluating Cost Recovery & Potential New Fees: The study will compare current fee revenue against calculated service costs to identify under-recovering fees. It will also review operations to identify potential new fees for services currently provided without cost recovery.
• Policy Subsidies & Council Discretion: While the study will establish 100% full cost recovery levels, the City Council retains the policy discretion to set actual fee recovery targets lower. The study will identify services (such as community recreation programs, youth activities, or public safety permits) where full cost recovery might create financial barriers or run counter to public policy goals, allowing Council to deliberately maintain partial subsidies funded by the General Fund.

About Development Impact Fees

 Development Impact Fees (DIF) are one-time charges collected at the building permit stage for new construction, expansion, or major redevelopment projects. These fees fund capital facility additions and infrastructure expansions necessary to accommodate community growth.

• Ensuring 'Growth Pays for Growth': Impact fees ensure that new development contributes its fair share toward the capital infrastructure demands it creates, preventing existing residents and general taxpayers from absorbing the cost of growth-related facility expansions.
• Restricted Capital Revenue: Impact fee revenues are placed into dedicated, restricted funds set aside strictly for capital growth projects. By law, impact fees cannot be used for daily municipal operations, routine maintenance, staffing, or correcting pre-existing facility deficits.
• Exemption from Proposition 218: Because impact fees are tied to quantifiable capital infrastructure demands resulting from development, they are not classified as special taxes or property assessments and therefore are not subject to the voter approval requirements of California Proposition 218 (1996).

About the DIF Nexus Study

The Development Impact Fee Nexus Study will evaluate growth projections, facility inventories, and capital planning to update the City's development impact fees schedule in compliance with California statutory requirements.

• Establishing Legal Nexus Findings (AB 1600 / Mitigation Fee Act): In accordance with California Government Code Section 66001 et seq. (the Mitigation Fee Act), the study will perform technical analyses to establish the three required statutory findings: (1) identifying the purpose of the fee, (2) identifying the use of fee revenues for public facilities, and (3) establishing a reasonable relationship (nexus) between the type of development project, the need for public facilities, and the fee amount charged.
• Determining Proportionality & Service Standards: The study will evaluate population and employment growth estimates (through horizon years such as 2045), existing public facility inventories (land acreage, building square footage, vehicles, and major capital equipment), and planned capital improvement projects to ensure fee rates are roughly proportional to each land use type's specific impact.
• Support for Local Housing Objectives: Through transparent modeling, the study will provide data to support policy decisions regarding affordable housing, enabling Council to evaluate targeted fee adjustments, subsidies, or exemptions where appropriate to encourage housing production while maintaining fiscal balance.

Peer Benchmarking, Timeline, and Public Engagement

• Peer Jurisdiction Benchmarking: As part of both the User Fee Study and DIF Nexus Study, Willdan will conduct benchmarking analysis against comparable Bay Area and San Mateo County jurisdictions (such as Foster City, Sausalito, San Bruno, Belmont, and Alameda) to provide local context and ensure Pacifica's proposed fees remain competitive and reasonable.
• Independent Council & Engagement Processes: Although conducted concurrently under a unified project scope, the Comprehensive User Fee Study and the Development Impact Fee Nexus Study will come forward to the City Council separately. Each study will feature its own public review, stakeholder discussions, and/or formal public hearings prior to Council adoption.
• Target Timeline: Project kickoff occurred following contract execution in August 2025. The City aims to complete the full study process, public hearings, and Council adoptions before the end of FY 2026-27.

Project Reference Documents & Resources

For further background, contractual details, and presentation materials regarding the City of Pacifica's fee study updates, please consult the following official resources:

• 2013 Cost Allocation Plan & User Fee Study: The City's prior comprehensive study, based on FY 2011 financial data.
• City Council Staff Report (August 25, 2025): Council Agenda Summary Report approving the Resolution authorizing the consultant agreement with Willdan Financial Services.
• Consultant Agreement with Willdan Financial Services: Attachment 1 to the August 25, 2025 Staff Report, detailing the complete scope of services, legal defensibility commitments, and project deliverables.
• Willdan Professional Services RFP Presentation: Attachment 2 to the August 25, 2025 Staff Report, providing slide deck overviews of the analytical methodologies for the CAP, User Fee Study, and DIF Nexus Study
• City of Pacifica FY2026-27 Citywide Fee Schedule - Effective July 1, 2026

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