Parks and Recreation Commission Meeting Agenda Packet - 11142024

Calculation of Fully Burdened Hourly Rates When reviewing cost estimates for fee related services prepared by City staff, we found relative amounts of consistency in the basic approach to calculating fully burdened hourly rates, described as follows: 1. Annual Salary and Benefits per participating staff member 2. Divide by 2,080 work hours per year for full time employees, or fraction thereof for part- time employees 3. Escalate resulting labor rate by an indirect cost factor of 33.9% Upon review of labor rates calculated by City staff, we approve of this basic approach to labor rate calculation and ultimately deem it to be conservative. Should the City decide to pursue a full comprehensive fee analysis in the future, rates presented in this report will likely result in higher outcomes because what is not included in the cost analysis process described above is review of additional layers of direct and indirect costs at the department and division level that would require a more comprehensive analytical approach to quantify and apply in the hourly rate calculation. We identified two basic opportunities for optimization of the hourly rate calculation and asked City staff to revise their cost calculations for each fee accordingly. First, step two should apply a basis of 1,800 hours for each staff person rather than 2,080 in order to account for basic absences from work such as vacation and sick leave. This practice is aligned with industry standards used in agencies across California for rate calculation, and even still represents a conservative adjustment. Second, we completed a detailed review of the City’s indirect cost rate through a robust overhead cost allocation model, approved by the City’s Finance Department. We are now able to define exactly what costs are recovered at this rate and the revised final indirect cost rate applicable to salary and benefit costs for an individual position is 27.03%. Ancillary Costs Some departments also included the hourly costs of equipment required to support fee for service activities. These hourly equipment rates are established by the Public Works Department, which uses a software service called Maintstar that tracks vehicle use. Rates applied in the software system are derived from the FEMA industry standard report and were not vetted by NBS. Examples include Public Works vehicles and equipment for support of special events, and vehicles required for public safety or other city staff services such as field inspection. In a few fees, the costs of contracted services specific to an event or service were also considered as directly attributable to the fee. We were initially concerned that adding such costs would be double counted in application of the indirect cost factor (step 3); however, after further analysis we agree that equipment and ancillary costs for contract services specific to a fee program or individual fee may be added in addition to the fully burdened labor rates. Data Sources The following data sources were generally used to support the analysis: • Current labor costs for personnel • Current equipment rates, where applicable to the service provided • Indirect Cost Rate(s) for recovery of overhead costs, as established by a Cost Allocation Plan study recently completed by NBS and the City’s finance department Page 23 of 56