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Full Cost Recovery Most of the seven cities that participated in this survey have fee structures that are intended to recover the full cost of providing development related services (see Table I). The exception is the City of Milpitas, which has some flat fees that recover an average of 50% of costs. Services for most development projects in Milpitas, however, are funded through full cost recovery Project Development Accounts that require initial deposits that are expended on a time and materials basis. Other cities with operating fee structures that are intended to be cost recovery are not meeting that goal because of revenue shortfalls in certain sectors. Gilroy's Planning Department (75-90%) and Fire PreventionlHazMat (90%) sections are not fully recovering costs. Santa Clara's fee structure is currently around 80% cost recovery. Fremont and San Jose, have 100% cost recovery. Five of the agencies - Gilroy, Milpitas, Morgan Hill, Santa Clara and Sunnyvale proposed fee increases in 2005/06FY to maintain or move closer to full cost recovery. Morgan Hill, which has an enterprise fund for its development services, has been phasing in Planning fee increases toward full cost recovery and had a 20% increase in fees in 2005/06FY. Fremont also has an enterprise fund for its development services to help it utilize full cost recovery of its costs. Table 1 2004-05 South Bay Area Cost of Development Survey Overview Development Service Fee Cost Recovery Status 04-05 Cost Recoverv Fremont 100% Gilroy Building & Engineering 100% Planning RanlZe is between 75% & 90% MilDitas 85%* Moman Hill BldlZ-IOO% / Panning-53% San Jose 100% Santa Clara 80% Sunnvvale 100% averalZe *Project development accounts 100%; flat fees 50% The final exercise was to calculate the City's percentage of cost recovery in the areas of Building Inspection, Fire Inspection, Private Development and Inspection-Engineering and Current Planning and Enforcement. Table 2 presents this information. As one can see, the City is considerably below a 100% cost recovery of development related costs of service in all areas except Building & Safety Division fees. It should be noted that the General Fund, therefore, subsidies or makes up the difference in the cost of providing these services to the development community, residences and businesses who are remodeling and/or repairing their homes and commercial space. Next Steps Since the preparation of this information, the City has begun the process of hiring a firm to complete a Cost Allocation Study and User Fee Study for the City. Staff has incorporated the findings from this 3