User fees: putting policies and structures in place now for the future.

• Author: Edds, Daniel
• Position: Solutions

While user fees cannot replace lost revenues, the current economic state of affairs provides a critical opportunity to review and update user fee policies, cost structures, policies, and internal procedural processes. By taking steps now, jurisdictions can be ready to make improvements as soon as economic recovery begins. Setting clear policies and procedures for cost recovery is a way to prepare for anticipated service needs and future growth.

ARGUMENTS FOR CHARGING FEES

A Government Finance Review (1) article noted three arguments surrounding the question of why user fees should be established:

* Philosophical. This argument says that individuals should be responsible for the cost of the public resources they consume and from which they benefit. For example, a single-family homeowner plans a $50,000 addition to her house. If reviewing the plans and inspecting the construction costs the city $1,500, then the homeowner should fully reimburse the city for those services.

* Political. According to this argument, user fees encourage accountability and fair representation. By assigning fees to services, individual citizens have more options for using services in ways that best suit their needs. User fees also create a direct relationship between the city and the individual consumer.

* Economic. This viewpoint argues that there is a direct correlation between user fees, demand, and consumption. The Government Finance Review article provided the example of Canadian municipalities employing metered systems to charge for water use--consumption dropped once consumers started paying for their water. A different kind of example concerns fire prevention. When jurisdictions don't have sufficient revenue to cover inspections of commercial properties, the workload can exceed the supply of inspectors. As a result, not all properties are inspected, which can have a negative impact on public safety. Furthermore, commercial occupancies that are not inspected frequently can and do change without clear notification to the fire department, potentially putting fire personnel at risk--finding a warehouse full of phosphate fertilizers when records indicate steel rebar could be catastrophic.

Jurisdictions that are considering whether to charge for some services can also consider the issue from the standpoint of cost recovery and service delivery. If a jurisdiction intends to provide a high level of service, it needs to consider what costs should be recovered. For...