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Methods of Analysis For this engagement, City staff performed an internal cost analysis for each fee under review. NBS provided a peer review of the cost analysis, as well as some basic benchmarking and comparison to other agencies to assist with implementation efforts. To align with industry standards and best practices in cost analysis when it comes to fees, two primary types of costs should be considered in determining the maximum eligible fee amount for recovery: direct and indirect costs. Direct costs are those that specifically relate to an activity or service, including the real-time provision of the service. An example of direct costs in a fee calculation is the labor costs for City personnel directly involved in the provision of the service for which the fee is charged. Indirect costs are those that support the provision of services in general but cannot be directly or easily assigned to a singular activity or service. An example of indirect costs would be a reasonable share of general administrative services and support costs provided by the City Manager, Finance, Information Technology departments, etc. Nearly all the fees under review in this analysis require specific actions on the part of City staff to provide the service, maintain the facility, or conduct the activity for which the fee is charged. Because labor is the primary underlying factor in these activities, most fee calculations proposed by staff involve application of a fully burdened hourly rate. That rate is then multiplied by the estimated time required to perform each service to establish the total cost of providing each service. For certain fees such as for use of the City's fields for sports play, additional cost components and data metrics were applied in establishing the proposed fee calculations. Further information on each fee calculation is described below. 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 1 N BS 2