BPC Policy No. 106

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SUBJECT: COST RECOVERY USER FEE POLICY PURPOSE: To provide general guidelines for establishing and maintaining a comprehensive user fee schedule to ensure that the District adequately recovers costs for the provision of services, benefits, or privileges (Services) in an efficient, legal and accountable manner. POLICY STATEMENT: The San Diego Unified Port District (District) provides Services that provide special benefit to individuals, businesses, and entities and shall ensure that reasonable costs associated with providing the Services are recovered. DEFINITIONS: User Fees are fees imposed in return for a specific benefit conferred, privilege granted, or service provided directly to the payor of the fee that is not provided to those not charged. User Fees are not imposed for the purpose of raising revenue. Examples of Services which may be assessed user fees are Leases, Tidelands Use and Occupancy Permits, Right of Entry Permits, In Water Hull Cleaning Permits, Appealable Coastal Development Permit, environmental review, and others. Cost Recovery is recouping all costs associated with a particular Service provided by an agency. A fee may not exceed the estimated reasonable cost of providing the Service for which the fee is charged. Fees must be reasonable, fair and equitable and proportionally representative of the costs incurred by the District. Costs qualify for cost recovery if they are necessary to provide the Service and the cost would not occur if not for the need to provide the Service. Cost recovery has three important rationales: (a) improving government efficiency and complying with the San Diego Unified Port District Act (Harbors & Navigation Code Appendix 1, Section 36); (b) maintaining equity considerations in regard to the provision of Services; and, (c) financial stability. Direct Costs are the costs incurred directly by providing a specified Service. These costs include staff time spent providing the Service, and any costs that can be traced directly to the production of a given Service or product. Third Party Direct Costs are external costs incurred directly for a specified Service. These costs include but are not limited to attorney fees and consultant fees that may be necessary to perform the specified Service. Indirect Costs are the incidental costs that are incurred by the District as a result of providing the Service not directly accountable or associated with the production of a

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Service. Indirect costs include department overhead such as operating expenses and internal administrative costs as well as District-wide overhead costs. Project, as used in the Policy, generally refers to projects, entitlements, activities, events, or actions related to which individuals, businesses, or entities may request Services from the District and should be interpreted broadly in accordance with the Policy Statement above. Routine Services generally refers to short-term agreement renewals with substantially the same terms, basic project reviews, simple access agreements, and other routinely provided services with minimal staff processing. PROCEDURE:

1. Cost Recovery Calculation

Departments with user fees shall determine the full cost of providing the Service based on direct and indirect costs. Indirect costs shall include department overhead and District-wide overhead (i.e., support services from Human Resources, Financial Services, Business Information & Technology Services, etc.). Departments with user fees shall be responsible for developing cost recovery calculations for their respective user fees in accordance with the cost recovery levels in this policy.

2. Determination of Cost Recovery Levels

User fees will be set at full cost recovery and in accordance with the Office of Management and Budget Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments. Legal limitations on charging fees, such as document production pursuant to the Public Records Act (Government Code §6250, et seq.) shall be adhered to and are not subject to this policy.

Additionally, the following economic and policy considerations shall be considered when setting cost recovery levels as follows:

The nature of the Services shall be considered when setting fees. Fee amounts shall be proportional and reasonably related to the costs

associated with providing the Service. The full cost should consist of both direct and indirect costs and should be included within the fee amount. Indirect costs shall be captured for each department.

Fee amounts should be sensitive to the “market” for similar Services as well as to smaller, infrequent users of the Service.

A flat fee shall be established for a bundle of Routine Services that collectively require minimal staff time to process (up to three hours total). This bundled fee is intended to aid small businesses and facilitate minor projects. The bundled fee shall not apply if Board action is required.

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3. Third Party (External) Direct Costs

Third party direct costs will be recovered in addition to the user fees outlined in the user fee schedule. Third party out of pocket costs include, but are not limited to, attorney fees, consultant fees, etc. required for the review and processing of projects pursuant to the California Environmental Quality Act (CEQA) and through the California Coastal Commission (CCC). These may include, but are not limited to, the preparation and certification of CEQA documents by the Board of Port Commissioners (Board), the preparation and approval of Port Master Plan Amendments by the Board and the CCC, the preparation and issuance of Appealable Coastal Development Permits by the Board or, if appealed, the CCC, and any other third-party expenses arising out of the entitlement process in the District’s determination. Third party direct costs also include the costs associated with defending and indemnifying the District against potential third party challenges arising from the CEQA and/or CCC review process.

4. Annual Review User fees may be updated annually to include an escalation based on Los Angeles Consumer Price Index (CPI) until the next comprehensive user fee study is undertaken. CPI will be based on the index change from the prior calendar year.

5. Frequency of User Fee Cost Studies A comprehensive user fee study and review of this policy shall be conducted every five years. While an annual review is necessary to determine whether fees should be updated according to the policy, a comprehensive annual user fee study may not be cost-effective because of its labor and time-intensive nature.

6. Availability of User Fee Information to Public

The Cost Recovery User Fee Schedule shall be made available to the public through the Office of the District Clerk.

7. User Fee Waivers

Discretionary waivers may be requested by project applicants and granted or denied, in whole or in part, in the sole discretion of the District. Partial or full user fee waivers that are in a total amount less than or equal to $50,000 may be granted in the sole discretion of the Executive Director or his or her designee and, if granted shall be publicly noticed monthly. Partial or full user fee waivers in a total amount greater than $50,000 may only be granted in the sole discretion of the Board of Port Commissioners at a public hearing. All discretionary waivers granted whether by the Executive Director or the Board of Port Commissioners at a public hearing must meet one or more of the following criteria listed in subsections (a) through (e) inclusive:

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a) Projects providing a service for the public good and not intended by project

applicant to generate net revenue and for which applicant is a 501(c)(3) federally tax-exempt entity. For illustrative purposes only, this may include, for example: free services provided on District terminals for ship crews; blood donation activities; free health services.

b) Projects that directly support the District’s operations and Federal

Strategic Port designation or port security needs, and for which the project applicant is a government entity. For illustrative purposes only, this may include, for example: projects of the U.S. military, U.S. Customs and Border Protection, or law enforcement agencies.

c) Scientific and academic research projects that directly support or promote

the District’s environmental initiatives. For illustrative purposes only, this may include, for example: marine biology research, water and air quality research.

d) Projects and solicitations that are requested or initiated by the District, to

fulfill the District’s environmental or community partnership initiatives/vision, or to provide a service or improvement necessary to the District’s operations, or if necessary to position the District competitively to secure business opportunities for the District, unless otherwise specified in the solicitation. For illustrative purposes only, this may include, for example: easements allowing provision of needed utilities to District property, utility relocation, projects by government agencies providing services to District, relocation of tenants requested by District, and/or solicitations of new business by the District.

e) District sponsored events approved by the Board of Port Commissioners

pursuant to Policy No. 771 Tidelands Activation Program. f) Projects for the benefit of an entire community when the project applicant

is a federal, state, or local government agency, or a Joint Powers Authority (JPA) and the government agency or JPA reciprocally waives or credits its fees in an amount substantially equal to the user fees incurred by the District for the project and/or the project applicant and the District have agreed to otherwise, pursuant to a specific finance agreement such as a Memorandum of Understanding or other arrangement.

8. User Fee Dispute Resolution

a) Any Person as defined in San Diego Unified Port District Code Section

0.11 who disagrees with any user fee incurred by the District may, within sixty (60) calendar days of receipt of a District statement/invoice, submit to the Executive Director or his or her designee, in writing, in a form prescribed by the District, a list setting forth each disputed user fee item including the date the fee was incurred, the amount of the fee and the

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BPC Policy No. 106 Page 5 of 5

description of the work performed which was the basis of the user fee. The list shall also contain all reasons why the Person believes the user fee imposed is improper or excessive.

1. If the total disputed user fees are paid, the District’s work on the

application or project will continue during the time of the dispute resolution process, unless the Person disputing the user fees requests that the work cease.

2. If the total disputed user fees are not paid, the District’s work on the

application or project will be suspended until the dispute resolution process is finalized at the highest level of review set forth in this policy and any required payment is received.

b) If the amount of disputed user fees is $50,000 or less, the disputed fee list

and reasons therefore will be reviewed by the Director(s) or his or her designee of the department incurring the disputed user fee(s) within fifteen (15) calendar days of receipt of the list of disputed user fees. After review, the Director(s) shall sustain the disputed amount of user fees in their entirety, reduce the amount of disputed user fees, or remove the disputed amount of user fees. The Director(s) or his or her designee shall set forth in writing the reasons for his or her decision which shall be provided to the Person disputing the user fees within ten (10) calendar days after review is completed. The Director(s) or his or her designee decision shall be the final level of administrative review.

c) If the amount of disputed user fees is in excess of $50,000, the disputed

fee list and reasons therefore will be reviewed by a three member panel of District employees selected by the Executive Director or his or her designee in his or her sole discretion. The three member panel shall review the disputed fee list and reasons for the fee dispute within fifteen (15) calendar days of receipt of the list of disputed user fees. After review, the three member panel shall sustain the disputed amount of user fees in their entirety, reduce the amount of disputed user fees, or remove the amount of disputed user fees in their entirety. The three member panel shall set forth in writing the reasons for its decision which shall be provided to the Person disputing the user fees within ten (10) calendar days after review is completed. The decision of the three member panel shall be the final level of administrative review.

d) An appeal to the decision in b) and c) above can be filed with the Executive

Director within ten (10) days of the original decision. The Executive Director or his designee has discretion to consider an appeal. An applicant can only file an appeal to the Executive Director once a year.

RESOLUTION NUMBER AND DATE: 2014-166, dated August 12, 2014 (Supersedes BPC Policy No. 106, Resolution 2013-108, dated June 11, 2013)

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RESOLUTION 2014-166

RESOLUTION AMENDING BOARD OF PORT COMMISSIONERS (BPC) POLICY NO. 106 - COST RECOVERY USER FEE POLICY - REVISED

WHEREAS, the San Diego Unified Port District (District) is a public corporation created by the Legislature in 1962 pursuant to Harbors and Navigation Code Appendix I (Port Act); and

WHEREAS, Section 36 of the Port Act provides at pertinent part that "the board [of Port Commissioners] shall by ordinance fix the rate of ...charges... for services furnished or provided by the district"; and

WHEREAS, the Board of Port Commissioners (Board) or (BPC) has adopted a Cost Recovery User Fee Policy, BPC Policy No. 106, to provide general guidelines for establishing and maintaining a Cost Recovery User Fee Schedule (Schedule) to ensure that the District adequately recovers costs for the services it provides for the benefit of individuals, businesses, and other entities; and

WHEREAS, the Board last amended the Schedule in April 2014 by Ordinance No. 2763, which reset the initial deposit at the lower of $7,500 or 50% of the estimated fee to address a concern that initial deposits were originally set too high; and

WEREAS, during the April 15, 2014 Board meeting, the Board directed staff to develop recommendations for waiver criteria and recommended modifications to BPC Policy No. 106; and

WHEREAS, based on the District's experience to date with the cost recovery program, and pursuant to the Board's direction, staff has identified a few specific circumstances where waiving Cost Recover User Fees are appropriate and in the best interest of the District and/or the public; and

WHEREAS, staff recommends modifying BPC Policy No. 106 as reflected in Attachment A to the corresponding staff report; and

WHEREAS, the Board has considered staff's analysis and proposed modifications, and agrees that these modifications are appropriate, with the exception that the public notice of discretionary fee waivers provided in Paragraph 7 of Attachment A should be issued on a monthly, as opposed to quarterly, basis.

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2014-166

NOW, THEREFORE, BE IT RESOLVED by the Board of Port Commissioners of the San Diego Unified Port District, as follows:

That BPC Policy No. 106 - Cost Recovery User Fee Policy, as amended, a copy of which is on file in the Office of the District Clerk, is hereby adopted.

APPROVED AS TO FORM AND LEGALITY: GENERAL COUNSEL

By: Assistant/Deputy

PASSED AND ADOPTED by the Board of Port Commissioners of the San Diego Unified Port District, this 12'*̂ day of August 2014, by the following vote:

AYES: Bonelli, Castellanos, Moore, Nelson, and Valderrama. NAYS: None. EXCUSED: Malcolm, Merrifield. ABSENT: None. ABSTAIN: None.

Robert E. Nelson, Chairman Board of Port Commissioners

Timothy A. Dduel District Clerk

(Seal)

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San Diego Unified Port District 3165 Pacific Hwy.San Diego, CA 92101

File #:2014-174

DATE: August 12, 2014

SUBJECT:

COST RECOVERY

A) RESOLUTION AMENDING BOARD OF PORT COMMISSIONERS POLICY NO. 106, COSTRECOVERY USER FEE POLICY, TO ADD ADDITIONAL WAIVERS

B) ORDINANCE AMENDING SAN DIEGO UNIFIED PORT DISTRICT COST RECOVERYUSER FEE SCHEDULE AND AMENDING ARTICLE 2 OF THE SAN DIEGO UNIFIED PORTCODE TO ADD SECTION 2.01, COST RECOVERY USER FEE SCHEDULE

C) DIRECTION TO STAFF REGARDING POTENTIAL FURTHER MODIFICATIONS TO THECOST RECOVERY PROGRAM

EXECUTIVE SUMMARY:

The District’s Cost Recovery User Fee Board of Port Commissioners Policy, BPC Policy No. 106,was adopted in 2013. This policy was developed to provide general guidelines for establishing andmaintaining a Cost Recovery User Fee Schedule (Schedule) to ensure that the District adequatelyrecovers costs for the services it provides for the benefit of individuals or individual entities. TheBoard also adopted Article 2, Section 2.00 of the San Diego Unified Port District Code establishingthe Schedule (Ordinance No. 2720). At the time of adoption the District committed to conductongoing review of lessons learned and to modify the program as warranted. The Schedule was lastamended in April 2014 by Ordinance No. 2762. The amendment addressed a concern that initialdeposits were originally set too high and re-set the initial deposit at the lower of $7,500 or 50% of theestimated fee (Ordinance No. 2762).

The Cost Recovery Ad Hoc Committee (Ad Hoc Committee) was formed at the April 15, 2014 Boardmeeting by Chairman Bob Nelson, pursuant to BPC Policy No. 19. An Ad Hoc Committee is anadvisory committee comprised of less than a quorum of the Board, and charged with accomplishing aspecific task over a limited period of time. In this case the Ad Hoc Committee is charged withconsideration of waivers and other refinements to the District’s cost recovery program. This isconsistent with the District’s commitment to review and refine the program. The District has now hadover one year of experience with the cost recovery program. Staff has received substantial feedbackfrom stakeholders impacted by, or interested in, the program. Based on the experience and feedbackreceived to date, changes to the Policy and the Schedule have been considered by staff and the AdHoc Committee. The Ad Hoc Committee met on May 13, June 18, June 27, July 10, and July 25,2014, to discuss proposed changes.

Staff recommends adopting changes to the BPC Policy No. 106 and the Schedule as reflected in the

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attached redlined documents (Attachment A and B, respectively). Staff also recommends that theBoard direct staff to consider further modifications as discussed below, to continue to work with theAd Hoc Committee, and to return to the Board after formulating additional recommendations.

RECOMMENDATION:A) Adopt Resolution amending BPC Policy No. 106, Cost Recovery User Fee Policy, to add

additional waivers.B) Adopt Ordinance amending San Diego Unified Port District Cost Recovery User Fee Schedule

and amending Article 2 of the San Diego Unified Port Code to add Section 2.01, Cost RecoveryUser Fee Schedule.

C) Direction to Staff regarding potential further modifications to the Cost Recovery Program.

FISCAL IMPACT:

The adoption of the amended Cost Recovery Policy and Cost Recovery User Fee Schedule is notexpected to have a material fiscal impact, although impacts to revenues will vary based upon actualrequests for user fee based services.

COMPASS STRATEGIC GOALS:

This agenda item supports the following Strategic Goal(s).

A Port that the public understands and trusts. A Port with a healthy and sustainable bay and its environment. A Port with a comprehensive vision for Port land and water uses integrated to regional plans. A Port that is a safe place to visit, work and play. A Port with an innovative and motivated workforce. A financially sustainable Port that drives job creation and regional economic vitality.

DISCUSSION:

Background

Section 36 of the Port Act provides that “the Board of Port Commissioners (Board) shall by ordinancefix the rate of services furnished or provided by the District.” On May 7, 2013, the Board adoptedArticle 2, Section 2.00 of the San Diego Unified Port District Code establishing the Cost RecoveryUser Fee Schedule (Ordinance No. 2720). On June 11, 2013, the Board of Port Commissionersadopted the Cost Recovery User Fee Schedule (Schedule) to Ordinance 2720.

The Cost Recovery User Fee Policy (BPC Policy No. 106) provides guidelines for establishing andmaintaining a comprehensive user fee schedule and requires that all existing user fees be in line withservice costs to ensure that all reasonable costs incurred in the provision of District services arebeing recovered. It is a best management practice that governments calculate the full cost of thedifferent services they provide and maintain a formal fee policy as recommended by the GovernmentFinance Officers Association (GFOA) and Federal Government Office of Management and Budget(Circular A-87).

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The Schedule is a centralized listing of the fees charged by the District for its user fee services andrelated administrative tasks. The Schedule serves as a resource for the public to understand thecosts associated with the various types of services the District provides. As a general practice,government agencies charge user fees to the recipients of its services. User fees generally apply toactivities that provide special benefits to individual persons, businesses, or entities as opposed to thepublic and the amount of the fee is usually related to the cost of the service provided. The District hasestablished user fees to ensure that those individual persons, businesses, or entities who use aservice pay for that service in proportion to the benefits they receive.

An amendment to the Schedule was adopted on April 15, 2014, to set the initial deposit at the lowerof $7,500 or 50% of the estimated fee (Ordinance No. 2762). Upon adoption and implementation, thePort tenants raised concerns that the initial deposits originally required were set too high, at 50% ofthe estimated fee. In response, the District reviewed its practices and commensurately reduced itsinitial deposits. The initial deposit amount now reflects the estimated time and subsequent cost ofstaff’s preliminary review.

The District is committed to providing excellent customer service, and continually reviews itsprocesses and practices in order to assess their effectiveness. Since adopting the cost recoveryprogram, the District has received substantial feedback from Port tenants and other stakeholders.Now after just over one year of experience administering the program, District staff has workedtogether with the Ad Hoc Committee to formulate recommendations for modifications to the programas detailed below. In addition to the recommended modifications being presented herein, staff isseeking Board direction to further review and consider two high-level concepts based on stakeholderfeedback and Ad Hoc Committee discussions:

Efficiencies and cost savings that may be gained by changing or refining the administrativepractices and procedures associated with cost recovery, as implemented by staff, currentlydocumented as “Cost Recovery Guidelines” (i.e., how time is recorded, who records time on aproject, etc.); and,

The potential for drawing a distinction between the District’s regulatory role and its role aslandlord; and whether or not staff time spent processing transactional documents related tolandlord/tenant negotiations should be considered already recovered through rents paid to theDistrict.

Recommendation A

Adopt resolution amending Board of Port Commissioners (BPC) Policy No. 106, CostRecovery User Fee Policy, to add additional waivers.

Based on the District’s experience to date with the cost recovery program, staff has identified a fewspecific circumstances where waiving Cost Recovery User Fees are appropriate and is in the bestinterest of the District and/or the public. Accordingly, during the April 15, 2014 Board meeting, theBoard directed staff to develop recommendations for waiver criteria. The recommended policymodifications related to waivers are as reflected in the attached redlined document (Attachment A).

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The recommended criteria fall into the following categories:

Projects related to charitable, not-for-profit activities or services.

Projects that directly support District’s operational or security needs or the District’s Strategic Portdesignation.

Research projects that directly support the District’s environmental initiatives.

Projects that are initiated or requested by the District.

District sponsored events approved by the Board of Port Commissioners pursuant to Policy No.771 Tidelands Activation Program.

Projects where the applicant is a federal, state, or local government agency or a Joint PowersAuthority and the agency reciprocates by waiving fees for the District, or has another financialagreement with the District relative to the project.

Staff recommends that any and all waivers must meet one or more of the criteria listed above. Staff isalso recommending that waivers where total fees would have amounted to no more than $50,000 maybe waived by the Executive Director, with notice to the public on a quarterly basis; and any waiver offees over $50,000 must be granted by the Board in a public meeting.

Recommendation B

Adopt ordinance amending Cost Recovery User Fee Schedule and amending Article 2 of theSan Diego Unified Port Code to add Section 2.01, Cost Recovery User Fee Schedule.

A number of changes to the Schedule (Attachment B) are recommended at this time. They are listedbelow with a brief justification for the modification.

Remove Short Term Sublease Fee

Some Port tenants have adamantly opposed the $50 fee being assessed for the staff time required toreview and approve short term subleases. An analysis of the first year’s activity shows that less thanfive short term sublease forms are submitted each month, which would constitute no more than$3,000 in total costs recovered for this service on an annual basis. Considering the minimal fiscalimpact to the District, and in an effort to minimize the impact, on tenants with short term subleases,staff is proposing the removal of the $50 short term Sublease fee.

Add Bundled Fee for Routine Review

An analysis of the first year’s activity shows that some agreements (i.e., non-negotiated agreements,renewals, short term contracts) do not require as much staff time as originally estimated. This is dueto the routine nature of these agreements which typically do not require significant negotiation oranalysis, and do not take more than three hours of staff time to complete. Short-term agreement

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renewals with substantially the same terms, basic project reviews, simple access agreements, andothers routinely require less time to process than originally estimated. In addition, many of theservices required to process these agreements routinely occur together. For example, renewal of aTidelands Use and Occupancy Permit (TUOP) requires a flat fee for the preparation of theagreement, as well as a flat fee for the processing of a Categorical Determination of Exemption(Determination). If the agreement is being renewed with the same terms, processing of the TUOPand Determination is routine and requires much less time to process than a new agreement. As aresult, staff is recommending a fee be added to the Schedule to capture this type of service:

Bundled Fee for Routine Review $500(i.e., Basic Real Estate Agreementand Categorical Determination)

A Bundled Fee is proposed to reduce the economic impact to small businesses similar to the purposeof the Tier II cost recovery category at the City of San Diego.

The proposed Bundled Fee will allow grouping routine level services that require less staff time forreview and processing into one user fee (i.e., basic real estate agreement and categoricaldetermination including environmental and coastal review).

Staff does not recommend diverging from full cost recovery. It should be noted, while the proposedBundled Fee will benefit all tenants both large and small, it is intended to specifically benefit smallertenants and businesses that typically require shorter term agreements and do not engage in lengthynegotiations. Because the Bundled Fee is based on the amount of staff time required to process aroutine agreement, it can be applied to a number of services that a tenant may request.

Remove Fee for Annual Stormwater Inspection

Staff is recommending that the cost recovery fees for annual stormwater compliance inspections atindustrial and commercial facilities be removed from the Schedule at this time. Four such servicesare identified in the Schedule, including National Pollution Discharge Elimination System (NPDES)Program Fees for (1) Industrial, Other; (2) Industrial, High; (3) Commercial, Other; and (4)Commercial, High.

Tenants, as lessees, are responsible for all activities and operations within their leaseholds havingthe potential to impact water quality. The District conducts the aforementioned inspections to ensuretenants are adhering to the Best Management Practices required by Article 10 of the San DiegoUnified Port District (UPD) Code. These inspection services are required annually to meetcompliance with the Regional Water Quality Board’s Municipal Stormwater Permit.

During the past months, staff evaluated the inclusion of annual compliance inspections in the costrecovery program. The assessment included a review of what other cities are doing, the amount ofthe fee, the appropriateness of including required services into the cost recovery program, andpotential liabilities to the District if tenants are not complying with District’s stormwater requirements.Based on this review, staff found a variety of approaches to administer stormwater programs. Costsfor administering these programs range from full cost recovery to using alternate funding sources.

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The District has the ability to recover costs associated with enforcement of the District’s stormwaterordinance (Article 10) through the Code itself, rather than through the cost recovery program set forthin BPC Policy No. 106. See, e.g., UPD Code section 0.11(i)(6) (Authorizing the District to “assessany reasonable administrative cost incurred in connection with the issuance of the AdministrativeCitation….”).

Accordingly, the District proposes removing costs for annual stormwater compliance inspections atindustrial and commercial facilities from the Schedule. Such removal will not impair the District’sability to seek enforcement costs through the UPD Code as presently constituted or as it may beamended in the future. Moreover, these services may be re-evaluated for inclusion in the costrecovery program at a later date.

Best Practices

It is a best management practice that government agencies’ cost calculations are based on directand indirect costs for all fees in order to accurately calculate the cost of providing services. Directcosts consist of costs that are incurred directly by providing a specified service, such as staff timespent on the service-related activities, including salary and benefit expenses. Indirect costs consist ofdepartment overhead, such as operating expenses and internal administrative costs, as well asagency general and administrative costs. In comparison, both the City of San Diego’s and City ofChula Vista’s indirect costs also consist of departmental overhead (operating expenses and internaladministrative costs) as well as citywide overhead costs. Failure to include indirect costs results ininadvertent subsidization of services that benefit individuals rather than the overall public.

The San Diego Unified Port District Code is a codification of certain District administrative, regulatory,and revenue-related ordinances designed to aid persons, entities, and agencies with interest in suchrules and regulations. Codifying the Schedule will make the Schedule more accessible to the publicas well as help track any amendments to the Schedule over time. Therefore, staff recommendsamending Article 2 of the San Diego Unified Port District Code to add Section 2.01, Cost RecoveryUser Fee Schedule.

Recommendation C

Direction to Staff regarding potential further modifications to the Cost Recovery Program.

Staff and the Ad Hoc Committee have discussed, at a conceptual level, two additional areas forconsideration. One area that may result in a more refined and efficient cost recovery program relatesto how the policy is implemented at a staff and systems level. Currently, staff relies on a very brief setof guidelines developed at the inception of the program. The District and its stakeholders may benefitfrom a more detailed set of standard operating procedures. In developing these procedures, staffwould consider where efficiencies can be gained and cost savings can be realized. The secondconcept that staff recommends be given further consideration relates to the distinction between theDistrict’s roles; one as landlord and the other as regulator and land use authority.

The San Diego Port Tenants Association has requested that the District reconsider the applicability orappropriateness of its cost recovery program to those services that it performs that are strictly related

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to its role as a landlord. The basis of the request is that a landlord generally covers its costs of doingbusiness, i.e., collecting rents, negotiating leases and lease amendments, etc. with its rental income,and that transactional real estate services should not be subject to cost recovery. This concept woulddistinguish project review, permit processing, environmental review, and entitlements as functionsrelated to the District’s role as regulator, and therefore, subject to cost recovery.

At this time, staff recommends that the Board direct staff to analyze its implementation of the costrecovery program and to document administrative procedures that bring about optimum efficiency.Staff also requests that the Board direct staff to consider the impacts and implications of eliminatinguser fees for services directly related to the District’s role as landlord and return to the Board in thefuture with its findings and recommendations.

General Counsel’s Comments:

The General Counsel’s Office has reviewed the issues set forth in this agenda sheet and there are nolegal concerns as presented. The proposed Cost Recovery User Fee Schedule complies with Section36 of the Port Act and applicable law. The Board may analyze the matters presented and takeappropriate action.

Environmental Review:

The proposed Board action does not constitute a “project” under the definition set forth in CaliforniaEnvironmental Quality Act (CEQA) Guidelines Section 15378 and is therefore not subject to CEQA.No further action under CEQA is required.

The proposed Board action does not allow for “development,” as defined in Section 30106 of theCalifornia Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s CoastalDevelopment Permit Regulations. Therefore, issuance of a Coastal Development Permit or exclusionis not required.

Equal Opportunity Program:

Not Applicable.

PREPARED BY: Robert DeAngelisCFO/Treasurer

Randa ConiglioExecutive Vice President, Operations

Attachment(s):Attachment A: Redlined Proposed Changes to BPC Policy No. 106Attachment B: Redlined Proposed Changes to Cost Recovery User Fee Schedule

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RESOLUTION 20xx-xxx

RESOLUTION AMENDING BOARD OF PORT COMMISSIONERS (BPC) POLICY NO. 106 – COST RECOVERY USER FEE POLICY

WHEREAS, the San Diego Unified Port District (District) is a public corporation created by the Legislature in 1962 pursuant to Harbors and Navigation Code Appendix I (Port Act); and

WHEREAS, Section 36 of the Port Act provides at pertinent part that “the

board [of Port Commissioners] shall by ordinance fix the rate of …charges… for services furnished or provided by the district”; and

WHEREAS, the Board of Port Commissioners (Board) or (BPC) has

adopted a Cost Recovery User Fee Policy, BPC Policy No. 106, to provide general guidelines for establishing and maintaining a Cost Recovery User Fee Schedule (Schedule) to ensure that the District adequately recovers costs for the services it provides for the benefit of individuals, businesses, and other entities; and

WHEREAS, the Board last amended the Schedule in April 2014 by

Ordinance No. 2763, which reset the initial deposit at the lower of $6,500 or 50% of the estimated fee to address a concern that initial deposits were originally set too high; and

WEREAS, during the April 15, 2014 Board meeting, the Board directed

staff to develop recommendations for waiver criteria and recommended modifications to BPC Policy No. 106; and

WHEREAS, based on the District’s experience to date with the cost

recovery program, and pursuant to the Board’s direction, staff has identified a few specific circumstances where waiving Cost Recover User Fees are appropriate and in the best interest of the District and/or the public; and

WHEREAS, staff recommends modifying BPC Policy No. 106 as reflected

in Attachment A to the corresponding staff report; and WHEREAS, the Board has considered staff’s analysis and proposed

modifications, and agrees that these modifications are appropriate. NOW, THEREFORE, BE IT RESOLVED by the Board of Port

Commissioners of the San Diego Unified Port District, as follows:

Agenda Item No. 16A Added 08-08-14

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That BPC Policy No. 106 – Cost Recovery User Fee Policy, as amended, a copy of which is on file in the Office of the District Clerk, is hereby adopted. APPROVED AS TO FORM AND LEGALITY: GENERAL COUNSEL _____________________ By: Assistant/Deputy

PASSED AND ADOPTED by the Board of Port Commissioners of the San Diego Unified Port District, this 12th day of August 2014, by the following vote:

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SAN DIEGO UNIFIED PORT DISTRICT

ORDINANCE xxxx

ORDINANCE AMENDING SAN DIEGO UNIFIED PORT DISTRICT COST RECOVERY USER FEE SCHEDULE AND AMENDING ARTICLE 2 OF THE SAN DIEGO UNIFIED PORT CODE TO ADD SECTION 2.01, COST RECOVERY USER FEE SCHEDULE

WHEREAS, the San Diego Unified Port District (District) is a public corporation created by the Legislature in 1962 pursuant to Harbors and Navigation Code Appendix I (Port Act); and

WHEREAS, Section 36 of the Port Act provides that the Board of Port Commissioners (BPC) shall by ordinance fix the rate for services furnished or provided by the District; and

WHEREAS, the BPC has adopted a Cost Recovery User Fee Policy, BPC Policy No. 106, to provide general guidelines for establishing and maintaining a Cost Recovery User Fee Schedule (Schedule) to ensure that the District adequately recovers costs for the services it provides for the benefit of individuals, businesses, and other entities; and

WHEREAS, On May 7, 2013, the Board adopted Article 2, Section 2.00 of the San Diego Unified Port District Code establishing the Cost Recovery User Fee Schedule (Ordinance No. 2720). On June 11, 2013, the Board of Port Commissioners adopted the Cost Recovery User Fee Schedule (Schedule) to Ordinance 2720; and

WHEREAS, based on over our year experience with the Cost Recovery Program and feedback from stakeholders, staff recommends amending the fee schedule as well as codifying the fee schedule in the San Diego Unified Port District Code to increase public access to the schedule.

NOW, THEREFORE, the Board of Port Commissioners of the San Diego Unified Port District does ordain as follows:

Section 1. That the San Diego Unified Port District Cost Recovery User Fee is hereby amended as set forth in Section 2, below.

Section 2. That Article 2, Section 2.01, of the San Diego Unified Port District Code is hereby adopted and reads as follows:

Agenda Item No. 16BAdded 08/08/2014

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SEC. 2.01 – COST RECOVERY USER FEE SCHEDULE FOR DISTRICT SERVICES

In accordance with Section 2.00, the following fees shall apply:

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Section 3. This Ordinance shall take effect on the 31st day from its passage by the Board of Port Commissioners.

APPROVED AS TO FORM AND LEGALITY: GENERAL COUNSEL _____________________ By: Assistant/Deputy

PASSED AND ADOPTED by the Board of Port Commissioners of the San Diego Unified Port District, this 12th day of August 2014, by the following vote: