Higher Volume of ‘User’ Fees Tax Business

Financially strapped California cities are staying solvent these days by charging businesses a bundle of new fees for the cost of everything from traffic lights to day care.

Does the burglar alarm in your office routinely go off by accident? That could cost you a special fee to cover the Police Department’s cost for checking it.

Planning a sprawling new commercial complex? Better count on a hefty fee to pay the city’s cost of providing a pleasant park next to it.

Instead of imposing new or increased taxes on residents, local governments are increasingly using such fees as a way to keep afloat, a recent USC study found.

“The burden of raising revenue has shifted from local residents to local businesses,” said Gary Reid, the USC School of Public Administration professor who conducted the study.

Ultimately, however, he noted that the taxpayer still pays. Business, he said, will pass on the cost of those fees to consumers, “unless they don’t mind losing profits.”

Experts are not surprised by the rising popularity of “user” fees. The passage of Proposition 13 in 1978 nearly stripped local governments of the ability to raise taxes by putting severe limits on property-tax increases and requiring a two-thirds vote before imposing new taxes.

At the same, Reid said, the state and federal governments began a slow reduction in financial aid to cities, leaving them in need of a financial bailout, he said.

Faced with these decreases, city officials started turning to user fees to keep out of the red while trying to pay for street repair, police protection and other basic services.

The outcome, Reid concludes in his study of 110 California cities, is the emergence of several new and unusual fees and increases in the old ones.

Today, a developer may pay a fee to cover the city’s cost of providing day care to employees his project will attract. Such a fee is used by San Francisco, he said.

Some cities require developers to include park-like areas in their developments. They also charge fees for a development’s impact on the environment, schools and traffic.

These fees are in addition to those traditionally charged for reviewing tentative tract maps, building permits, sewers, water, garbage collection and lights.

Reid’s 350-page report, which was done for the Los Angeles Taxpayers Assn., found a “great disparity” in the amount of fees charged for the same services.

For instance, Newport Beach would charge an estimated $16,555 to review the tentative tract map of a large development. Buena Park would only charge $400, the study showed.

Glendale would charge $15,750 for the same service, about $2,400 more than its neighbor, Pasadena. Los Angeles would charge only $865.

Although Reid said the study appears to indicate that Los Angeles County levies an average of 73% less in user fees than other areas of Southern California, questionable differences in fees charged in the county exist.

A large commercial project in Pasadena might be charged a $33 minimum sewer fee. In Los Angeles, the fee would be $1.50, he said.

Such disparities raise the “question of whether they are based on reimbursement of the actual cost of the service, or whether . . . they cover far more.”

Instead of basing fees on the cost of the service, some cities may be using them to pay for little-related projects, such as a new sewer system, he said.

“The latter would be inequitable because it would benefit those not paying their fair share of the cost of such improvements,” Reid said.

Fees tend to be highest in cities already most attractive to businesses and developers, since officials there can charge considerable amounts without losing potential business.

But sometimes even smaller cities surprise businesses. Say, for instance, a developer decides to build an office complex in Simi Valley. Among other charges, the developer would likely be slapped with a fee for construction of traffic signals.

The cost would be $2,461 per 1,000 square feet of development, Reid’s study shows.